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As the economy suffers in the wake of the national credit crisis and housing slump, local boat buyers should expect thousands of dollars in incentives when the famed Annapolis Boat Shows get under way next month.
Tidewater Marina and Annapolis Yacht Sales are both offering consumers "fractional ownership" options, allowing them to split the cost of boats. Tidewater's even throwing in free equipment packages - with stereos, flat-screen TVs and in-mast furlings - worth as much as $25,000.
Meanwhile, Offshore Performance in Grasonville is offering service winterization packages, free storage over the winter and a free tanks of fuel.
The Annapolis Boat Shows take center stage next month as the international spot for manufacturers to show off new models. The sailboat show runs from Oct. 4-8 followed by the powerboat show Oct. 11-14.
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While tighter lending requirements have made borrowing harder, exhibitors are encouraged by the Federal Reserve's recent decision to lower interest rates by half a percentage point. The rate lowers the amount banks charge to each other for overnight loans, creating more liquidity in the market.
"Clearly, softening in the housing market has contributed to softening in the first half of this year in the boating industry," said Thom Dammrich, president of the National Marine Manufacturers Association. "I think with this interest-rate cut, it's going to position us for a recovery in 2008."
Rates will be down in terms of boat financing, said Paul Matrangola, Tidewater's sales manager whose marina features Hunter sailboats ranging in price from $100,000 to $450,000 and Dufour Yachts running from $150,000 to $600,000.
"We're optimistic," he said. "We're fortunate to be selling to customers who have managed their (finances) in a good fashion, particularly with sailboats."
Garth Hichens, owner of Annapolis Yachts Sales, which sells Beneteau models and is holding an open house this weekend, acknowledged a "shift in the market" but said it's because people have less time on their hands, not less money.
"People still buy high-end boats," he said.
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A person "buys a Porsche because he loves driving around in a Porsche. That's what these boats are."
But to help busy families that don't have time or money to invest in a large yacht, the company is for the first time offering a fractional ownership incentive for its Beneteau boats ranging in price from $150,000 to more than $400,000. For example, a 40-foot Beneteau for $220,000 could be split between four people at $55,000 each.
Customers also can add the cost of "concierge" maintenance service to monthly payments, he said.
The company is also selling "day sailor" Alerion boats that range in price from $35,0000 to $350,000 and are designed to be taken out for two or three hours, not the entire weekend. The Sabre Spirit, a cross between a day sailor boat and a cruiser, is priced at $250,000.
While dealers say high-end customer are unaffected by the ups and downs of the stock market, economist agree that many will be more hesitant about purchasing boats this year.
"People from all walks of life are feeling squeezed by the housing downturn," said Greg McBride, senior financial analyst for Bankrate.com. "That's left a lot of question marks about the economy."
While the Fed's rate cut was designed to lower borrowing costs so consumers are more likely to make those big-ticket purchases, credit requirements will still keep some from getting a loan, he said.
Bill Proctor, owner of OffShore Performance, said financing for powerboats has gotten so tough for some consumers that a bank turned down one customer down "because he has three homes."
Mr. Proctor said he'll have a better idea of how customers are feeling between November and up to December, when the company sells most of its boats. But he said his company's goal was to sell $8 million in boat sales by year's end and he expects to be short about $1 million.
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Meantime, offshore is going back to its manufacturers to get better discounts.
"They are going to pay interest for nine months to a year or I won't buy the boat," he said. "Five years ago, your sales were good, your margins were more, you didn't worry about that."
Joseph Cater, president and chief economist of Market-Economics in Annapolis, said he expects many consumers took increased equity from their homes and bought big-ticket items like boats and cars but have seen that equity drop as home values declined.
"They (were) snapping their suspenders saying they're a millionaire," he said. "All of the sudden it's like, 'I'll keep that old Volvo. I'll keep that old boat we've got.'"
But Zoltan Pozsar, senior economist with Moody's Economy.com who covers the Maryland and Washington economies, said he expects the some consumers to be unaffected by turmoil in the market.
"Not all consumer are created equal," he said. "If you are at the lower half of the income distribution, things are pretty bad right now ... You're probably not benefiting from stocks. But on the other hand, if you're in the top half things are fine. Things are not falling apart in any case."
Joe Thompson, a yacht broker with Crusader Yacht Sales in Annapolis, said his company, which prices yachts between $18,000 and $400,000, is not seeing the pressures of the credit market.
"The yachts that we sell are long-term investments," he said. "Our customers tend to be more experienced. They come to us looking for a good quality boat and they have the expectations that the boat is going to hold its value."
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