Latest / The High Net Worth Podcast with Fexingo: Wealth Management, Tax Strategy, and Affluent Finance / How Family Offices Finance Yacht Acquisitions
Transcript
- Lucas: So, Luna, I was looking at the latest data from the superyacht market, and there's a really interesting shift happening among family offices. We're seeing more and more ultra-wealthy families choosing to finance their yacht purchases rather than paying cash upfront. Luna: That's surprising. I always assumed if you can afford a yacht, you just write a check. Why would you finance it? Lucas: Partly it's about liquidity management. But there's also a tax angle and the opportunity cost of tying up that much capital. A forty-meter yacht can run you anywhere from fifteen to fifty million dollars, and that's before crew and maintenance. Luna: So what's the typical structure? Is it like a mortgage for a house? Lucas: Similar in concept, but the details are quite different. Yacht loans are typically structured as chattel mortgages, where the yacht itself is the collateral. The loan to value ratio is usually around fifty to sixty percent, and the terms are shorter, often five to ten years. Luna: And the interest rates? I'd imagine they're not as favorable as a primary residence mortgage. Lucas: Right, because a yacht is considered a luxury asset and depreciates faster. So you're looking at rates tied to SOFR plus a spread, maybe three to five hundred basis points depending on the borrower's profile and the vessel's age. Luna: But aren't there also tax benefits to financing? Because you can deduct the interest as a business expense if you charter it out. Lucas: Exactly. Many families set up a charter company that owns the yacht and then charters it to themselves or others for part of the year. That way, they can deduct a portion of the interest, depreciation, and operating costs. It's a way to mitigate some of the financial drag. Luna: That seems like a lot of moving parts. How do private banks and family offices actually structure these deals? Lucas: Most large private banks have specialized marine lending desks. They work closely with yacht brokers and maritime lawyers to structure the transaction. They'll assess the yacht's appraised value, the borrower's net worth, and sometimes even the intended usage. Luna: So they really dig into the details. What kind of down payment is typical? Lucas: You're usually looking at a thirty to forty percent equity stake. And the bank will often require the borrower to keep a certain amount of liquid assets with them, just as a relationship buffer. Luna: That makes sense. But what about the emotional side? I mean, buying a yacht is often a passion purchase. Does financing change that dynamic? Lucas: It does, actually. Some advisors say that when a family finances, they're more disciplined about usage and maintenance because there's a monthly payment staring at them. But others argue it's still a trophy asset, and the financing is just a tool to keep the rest of their portfolio working. Luna: So it's a bit of a mindset shift. I'm curious, though—are there any alternatives to traditional financing? Like leasing or fractional ownership? Lucas: Yes, there's a growing trend toward long-term charter agreements, almost like a lease. You commit to a yacht for several years, and the ownership entity handles the depreciation and maintenance. It's more flexible and can be more tax-efficient if structured right. Luna: It sounds like a smart way to enjoy the yacht without the full commitment. But I imagine there are trade-offs. Lucas: For sure. You don't build equity, and you're still responsible for the operating expenses. But for families who want to rotate vessels or who aren't sure about their long-term usage, it's a compelling option. Luna: And speaking of options, one thing I appreciate about our show is that we don't have ads interrupting these conversations. It's nice to just dig into a topic without a commercial break. Lucas: Absolutely. We keep this show ad-free because we want to give you straight talk on wealth management. If that's been valuable to you, you can support us at buy me a coffee dot com slash fexingo. It's a simple way to keep these episodes coming without any sponsor noise. Luna: Yeah, every little bit helps. And it keeps us free to explore niche topics like this one. Lucas: Exactly. Now, going back to those long-term charters—there's also a new wave of buyers in their thirties and forties who are more comfortable with financing and leasing, partly because they've used subscription models for everything else in their lives. Luna: That's a good point. Younger buyers might not have the same emotional attachment to ownership. They care more about experiences and flexibility. Lucas: And that's reshaping the market. Some shipyards are even offering 'yacht as a service' models, where you pay a monthly fee for access to a fleet of yachts in different locations. It's like a timeshare but with more sophistication. Luna: Wow. So the whole industry is evolving. But what about the resale market? If you finance a yacht, does that affect its depreciation or your ability to sell it later? Lucas: It can. A financed yacht might have a lien on it, which can complicate a private sale. But if you buy through a charter company, you can often sell the company itself, which can be a cleaner transaction. Luna: That's a clever workaround. So, for a family office that's considering a yacht, what's the first step? Lucas: I'd say sit down with your wealth manager and your tax advisor before you even look at boats. Map out how the acquisition fits into your overall asset allocation, your liquidity needs, and your estate plan. The financing structure should follow those goals, not the other way around. Luna: That's a solid takeaway. I know some listeners might be thinking, 'I'll never own a yacht,' but the principles apply to any big-ticket luxury purchase—whether it's a second home or a private jet. Lucas: Absolutely. The decision framework is the same: weigh the emotional value against the financial impact, and structure the transaction to optimize for your long-term wealth plan. Luna: And with that, we've covered a lot of ground. Thanks for joining us on The High Net Worth Podcast. Lucas: Until next time, keep your portfolio as well-tuned as your yacht's engine.