Boating and the bottom line

The television crews at the Southampton boat show, where 800 boats worth more than pounds 60m are on display this week, all head for the biggest and most expensive vessel, a Predator 80.

Built at Poole in Dorset by Sunseeker, a name synonymous with high-performance luxury motor yachts, its specification reads like a house: three bedrooms ("cabin" conveys totally the wrong impression), two bathrooms, separate lounge and dining areas, crew quarters, sun deck with electric barbecue, bathing platform with hot and cold showers, and of course a built-in garage for the ski-boat. She is inches short of 80ft long, has a range of more than 400 miles and a top speed of about 40 knots.

The price tag is the far side of pounds 1.5m, and that's just the start. Including insurance, berthing, equipment maintenance and crew, not to mention fuel consumption of three gallons a mile, running costs for the Predator will be pounds 1,000 a week.

For not much more than it costs to run the Predator for a week, you can buy your first boat: a Mirror sailing dinghy, one of the world's most successful boats, with sales of more than 70,000 in the past 20 years. It is made of wood, comes as a kit, can travel on a roof rack, and can give hours of fun on inland lakes or coastal waters. If you can tell the difference between a hammer and a screwdriver, you can build a Mirror in three or four weekends, or less if you are an experienced DIY person.

Maggie Collins, 16, and her father, Geoffrey, put theirs in the water 10 days after the kit had been delivered to their Bournemouth home. "We unpacked it on the Sunday and spend a bit of time reading the instructions and making sure we knew what everything was," says Geoffrey, who describes his previous DIY experience as "putting up shelves which soon fell down".

"The tedious part was waiting for the paint to dry," Maggie says. "Apart from that we would have been out on the day before." The total cost was about pounds 1,300, plus a further pounds 200 for a second-hand trailer, and it will cost less than a fiver a day to launch it at one of several local slipways.

Boats under pounds 15,000 are normally either bought for cash, with a bank loan, or through an unsecured loan. The rate will normally be linked to the finance house base rate and, as always, it pays to shop around.

Companies such as Mercantile Credit, the marine finance division of Barclays Bank, offer what is known as an "even spread" or equalised repayment loan. The monthly repayment is fixed in cash terms, but the term varies as interest rates rise and fall. Budgeting is easy, but you don't know when the loan will be paid off - an arrangement which suits some people better than others.

Over pounds 15,000, the normal form of finance is a marine mortgage, which is secured on the boat in much the same way as a home-buyer's mortgage is secured on the house.

Julian Vincent, marine manager at NWS Bank, part of Bank of Scotland, worked out the terms for one of Britain's most popular new boats: the Senator 21 from Sealine, a pounds 27,000 four-berth sports cruiser which is equally at home pottering on the Thames or cruising offshore at 20 knots. "Assume that you put down pounds 7,000 deposit and took the balance on a 10- year mortgage, the APR would be 8.8 per cent, and the repayments would be pounds 12.40 per pounds 1,000, or pounds 248 per month."

On a new boat, arranging a mortgage is simple - but it can be more complicated when buying second-hand. Since the boat is security for the loan, the lender needs to be sure of clear title - in other words, that the seller is the legal owner, and that nobody else has a claim on the craft. Ownership is normally proved by the original builder's certificate and a bill of sale from the first and subsequent sales. If the owner cannot produce them, the loan may be delayed, or even refused.

"With older boats we often find there are gaps in the chain," Mr Vincent says. "It's then a matter of phone calls and faxes to previous owners and brokers to try to establish good title. Sometimes, unhappily, we aren't successful."

Buying through an established broker is usually the best way to avoid disappointment. Members of the Yacht Brokers Designers and Surveyors Association (YBDSA) have a strict code of conduct, and will often find out if there are likely to be problems with title before negotiating a sale.

Lenders will also want a survey and valuation. In the case of new boats - or those under a year old - the original builders' certificate will normally suffice; otherwise, you should budget for about pounds 300 in fees, plus a further pounds 200 or thereabouts if the boat has to be lifted out of the water for the surveyor's inspection.

Once you have found the boat and done the deal, you will be starting to get excited. But there are still important issues to be resolved: training, insurance and berthing.

Marine insurance is calculated in similar fashion to car insurance: what's the make, model and value, the experience of the owner and where it will be kept. For a Sealine 21, to be kept at a South Coast marina, the specialist insurer GJW Direct quoted pounds 227 a year for inshore and coastal use. That figure assumes that you have had some experience and have taken part in the Royal Yachting Association's training scheme, which operates through a network of approved sea schools and a series of carefully graded and structured courses. Starting from scratch, you should budget for pounds 750 (sail) to pounds 1,200 (power) for training, depending on the school, location and time of year.

The next item in the budget is berthing. For a fully-equipped marina berth for the Sealine, on the Solent, expect to pay about pounds 2,000 for a full year. But a marina berth is not essential. A swinging mooring on a buoy or pile will be much cheaper, or you could opt for a drying mooring; the boat floats at high tide, but at low water simply sits on the mud.

Two essential items of expenditure: lifejackets for all on board; and a VHF two-way radio. Buy them before you take delivery of the boat. A lifejackets costs about pounds 100; VHF sets are available at pounds 150 or less.

If you don't know how to use the radio, training is available from sailing schools, local colleges or from the Radio School on Hayling Island, Hampshire. It costs pounds 79 for the one-day training course and examination for the operator's licence. Knowing how to use the radio is not just a matter of keeping in touch with family and friends. One day it could save your life - or the lives of those you love.