Will industry embrace used-boat certification?

A new program tailored to Hinckley’s ‘closed loop’ business model may be much more problematic for others to adopt
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Yard managers such as Tim Shields of Hinckley’s Portsmouth, R.I., yard inspect jetboats prior to the spring launch. The Portsmouth yard will release 160 Hinckleys from the jetboat service program, which is a prerequisite for Pre-Owned Certification.

Yard managers such as Tim Shields of Hinckley’s Portsmouth, R.I., yard inspect jetboats prior to the spring launch. The Portsmouth yard will release 160 Hinckleys from the jetboat service program, which is a prerequisite for Pre-Owned Certification.

The Hinckley Company has never shied away from innovation.

The company launched the first joystick control — the Jetstick — in 1998, years before the now ubiquitous joystick graced helms around the world. So it probably came as no surprise to Hinckley enthusiasts when the company unveiled a remote monitoring service called OnWatch last year and added a Certified Pre-Owned program in recent weeks.

OnWatch is Hinckley’s proprietary data collection software that runs in the boat and broadcasts data from the boat’s systems via the cellular network to a server in the cloud that Hinckley monitors, says Hinckley CEO Peter O’Connell. So if a system isn’t running quite right — say a family is operating their boat on Long Island Sound and doesn’t notice a plastic bag getting sucked into the intake — Hinckley will get an alert saying the engine is overheating and will notify the owner before there is real trouble.

The certified pre-owned component — a widely known concept — has never gained traction in the boating industry, says National Marine Manufacturers Association president Thom Dammrich. “I’m not aware of any other boatbuilder that has tried this,” says Dammrich. “We had some discussions about it 12 years ago when we started the certified dealer program, but there was not enough interest to pursue it.”

The American Boat & Yacht Council had a similar problem, says ABYC president John Adey. “I wanted to get a program going here,” Adey says. But when he’d explain his vision “everyone had different ideas about how they would want to do it.” His idea was to provide buyers with an extended warranty on boats that met ABYC standards through an inspection course the ABYC would develop. “There just wasn’t enough enthusiasm to spend a lot of time on it,” Adey says.

“I commend Hinckley for doing this,” Dammrich says. “I think one of the challenges in our industry is that most pre-owned boats are sold driveway to driveway and not through dealers. So the experience the consumer has with a boat bought driveway to driveway is completely outside our control. That experience could turn him off for good. Improving that pre-owned experience through a certification program, I think, makes a lot of sense.”

Hinckley CEO Peter O’Connell says the program is “the glue that binds it all together.”

Hinckley CEO Peter O’Connell says the program is “the glue that binds it all together.”

A no-dealer ‘closed loop’

The fact that Hinckley sells directly to customers without a dealer network is an important component of the Certified Pre-Owned program, says O’Connell. “We build the boats, maintain the boats and sell the boats in brokerage. For us, it’s sort of a closed loop,” he says. “That is an integral part of this, and I think [having a dealer network] would make it difficult for anyone to follow our lead.”

To qualify for Certified Pre-Owned, boats have to be enrolled in the Jetboat Service Package, a comprehensive maintenance program. About half of the 1,030 jetboats the company has manufactured over the years are enrolled in that program, O’Connell says.

“For the people who enroll, we pick the boat up at the owner’s dock or marina and bring it back to one of our yards,” O’Connell says. The company operates seven East Coast yards (soon to be eight with a Connecticut opening) and has service agreements with yards throughout the rest of the country.

Hinckley then runs the boat through a very long checklist to make sure all of the systems are working correctly and that the engines are running at the right temperature, for example, O’Connell says. There is a complete decommissioning of the engine, electrical and water systems.

When a boat arrives at the yard the canvas department will go and remove all of the soft goods to be cleaned, tagged, bagged and stored in a climate-controlled building. Then the boat gets put into indoor heated storage for the winter, where the service jet propulsion unit will go through and do diesel service — changing the oil, the filters, batteries, and operating all of the systems, such as plumbing, to make sure everything is operating perfectly. The company does annual maintenance to mechanical and electrical systems, Jetstick, jets, paint and gelcoat finishes.

A new varnish is applied to the boat and it is detailed, which means that every part is cleaned, including the bilge and engine room, so meticulously that cotton swabs are used inside the corners of the drawers. There is an automatic review of any outstanding warranty and recall issues for all equipment.

In the spring when the boat is launched, the company goes through yet another extensive checklist to check the operating speed, for example, to make sure the boat is operating at or above the speed it did when it was stored. Then the soft goods are put back into the boat, as well as new fender covers, “so it all looks perfect when we bring it back to the owner’s dock,” O’Connell says. “I’m looking out my window right now at probably 20 Hinckleys and it’s very hard to tell what year they are.”

“For those people who care enough about their boat to run it in that program, we know the boat so well and we know there’s no surprises coming,” he says. “So when they go to sell that boat, we will warranty it ourselves.”

Prince William Marina in Woodbridge, Va., has had a certified pre-owned program for about 10 years.

Prince William Marina in Woodbridge, Va., has had a certified pre-owned program for about 10 years.

How it works

The warranties provided vary according to the age of the boat. Platinum coverage applies to Hinckleys less than five years old, providing a lifetime hull and deck warranty and a powertrain warranty for the balance of the original, plus two additional years.

Gold coverage provides yachts five to 10 years old with a hull and deck warranty for 12 years from the original date of purchase and two-year powertrain coverage. Silver coverage provides Hinckleys that are more than 10 years old with a one-year powertrain warranty.

The Jetboat Service Package isn’t cheap, O’Connell says, but it helps owners maintain the value of their boats. “We have a well-kept Hinckley Picnic Boat from the mid-’90s that the owner probably paid mid- to upper $200,000, but here he is 20 years later selling that boat in the mid-to-lower-$200,000 range.”

One of the first sales O’Connell was involved in after joining the company in September was a 36-foot 2006 Picnic Boat EP, which sold for $375,000. “I looked up what the person paid initially, and I think the standard was $399,000,” he said. “We can further enhance that resale value with this program.”

The company knows the quality of the carbon fiber and kevlar hulls it builds, O’Connell says, and it doesn’t have the dealer floorplan liability. “The majority of the boatbuilders out there sell to dealers, and they’re on the hook for floorplan financing. It can just be so much risk for a normal sort of dealer-based boatbuilder to add a certified pre-owned program into the mix.

“It helps drive our boat sales, though most manufacturers couldn’t care less how their dealers do on brokerage boat sales,” O’Connell says. “Since we sell new boats and brokerage boats, it’s important to us, and we maintain them during their lifespan. One of the other issues is, most companies really wouldn’t have the knowledge or wherewithal to write the warranty on a diesel engine. We know the engines well enough and trust our partners — Yanmar, Caterpillar, Cummins and Volvo — enough that we’ll extend the warranty.

“For Hinckley’s business model, the Certified Pre-Owned program is the glue that binds it all together. It’s a great offering to our clients; they love it,” O’Connell says. “It’s new, but the response has been tremendous. Part of it is it doesn’t cost anyone anything else. The company takes care of it, so it doesn’t cost the buyer or seller any money.”

OnWatch

Hinckley OnWatch differs from other systems in two ways, the company says on its website. One, results are reported to owners on their mobile devices, as well as to Hinckley Yacht Services. It also monitors, reports and retains engine data that enable Hinckley service techs to prevent problems, closely tailor service programs to the way the boat is used, perform remote diagnostics today and perhaps eventually deliver necessary service from afar.

“If somebody brings the boat to us, say it’s five years old, and says I’d like you to sell it and it’s a great boat, you guys care for it, we’ll pull down records from the cloud and look at operating performance,” O’Connell says. “Because over time, engines do need service. They need to be flushed out so they operate cooler and more freely. We can pull that data from the cloud. Maybe he runs it at too high RPM, or there was an event where the strainer was clogged and the engine overheated. In that case we might say, ‘OK, you had an event last summer. Let’s just check and make sure there was no damage from that.’ ”

The company is installing OnWatch on older boats as an option. “We just sold a Certified Pre-Owned 2003 44-footer, and it had the OnWatch system on board,” O’Connell says. “We didn’t offer that in 2003, so it was something the owner added.”

That seller was a perfect example of a buyer using the Certified Pre-Owned program. “That was a great case. The owner of that 44 brought us his boat, we stored it, maintained it,” O’Connell says. “Then he wanted to buy a larger brokerage boat, so we gave his boat certified pre-owned status, and he bought a boat that has certified pre-owned status. People who buy Hinckleys really appreciate that we’re sort of in it together. It’s pretty rare anyone wants to leave the Hinckley family, and we only have 1,030 jetboats out there, so it’s a limited group.”

O’Connell thinks people will come to expect manufacturers to monitor performance and inform them if there’s a problem. “If we see the temperature of the engine creeping up, which happens, we know that when that boat comes in for service, we can show the owner — hey, your operating temperature has increased all summer long, we should do some maintenance while it’s in storage,” O’Connell said. “Nine out of 10 times they shake my hand and say thank you. And for the person who says, no, skip it, when they go to sell the boat, they don’t get certified pre-owned status.”

The RV industry system

Guaranteeing certified pre-owned in the marine industry is much more difficult than in the auto industry, for example, because not only is the marine industry much more fragmented, but also the production volumes are very low, Dammrich says. “We’re talking 200,000 to 250,000 new boats a year,” he says. “There are 17 million new cars built a year. There are 12 million boats registered in the country total, and there are 17 million new cars made every year.”

Last year, Cedar Mountain RVI, an RV inspections company, launched a certified pre-owned program for used RVs in agreement with RV Inspection Connection, according to RV Pro, a B2B publication. The program is being offered to RV dealerships nationwide, and it conforms to the National RV Inspectors Association’s (NRVIA) Code of Ethics and High Standards. RV is also a small industry, with shipments totaling 430,691 units in 2016, according to the Recreation Vehicle Industry Association.

“If you look at the RV industry, they have a very cool nationwide warranty program people buy into,” Adey says. “I don’t know how they got that cohesive group together. It seems like such a refreshing idea when you look into their plan.”

The relatively new program, similar to the well-established certified pre-owned programs in the car and truck industries, aims to increase the value of used RVs for both dealers and buyers in the same way that pre-owned programs have positively affected the used-car industry. To deliver the new program, the companies utilize a network of certified technicians across the country.

Dealer-level certification

Certified pre-owned programs are supported at the dealer level in the auto industry.

“In the auto industry, certified pre-owned cars fetch a higher margin than used cars that aren’t,” says Dammrich. “Most boat manufacturers are in the business of manufacturing and selling new boats. They’re not in the business of selling pre-owned boats. They’d have to change their business model. I think that’s a decision each company has to make on their own. I do think if there was a way to offer a quality certified pre-owned program that drove more consumers to dealers to buy pre-owned boats rather than driveway to driveway, it could be good for consumers and would help the industry.”

Will it ever happen? “I don’t know,” says Dammrich. “I’m not optimistic because I think most manufacturers define their business by making and selling new boats. It would have to be manufacturer-backed a little bit, I think. Because, are you going to get a certified pre-owned Sea Ray from a Chaparral dealer?”

In the case of Prince William Marina in Woodbridge, Va., the answer is yes. Or, at least, the other way around. The Bayliner, Scout Boats and Sea Ray dealership will certify anything as long as it makes sense, says owner Carlton Phillips.

“We’ve been doing a program for about 10 years, I guess,” Phillips says. “I took my wife’s car in for repair once. It was a Lexus, and I was looking at the cars in the lot — the new cars and the certified pre-owned cars — and I couldn’t tell the difference. I said, ‘I need to do that.’ ”

“I don’t care whether it’s my brand or not,” Phillips says. “The motors are made by only two or three companies. Right now I probably have, I don’t know, eight or 10 boats that are not my brands but that are certified pre-owned. I have a South Bay pontoon, two Formulas, a Chaparral, a Regal and a Wellcraft. I don’t sell any of that brand new.”

Technician support

The dealership will certify anything less than 10 years old as long as it makes sense. On large boats the dealership goes through 300 checks; on small boats, 140 checks. If the boat passes muster, Prince William Marina will buy an extended warranty policy through a second company. Phillips says he has three or four he uses.

“It saved my business, frankly,” Phillips says. “People buying a boat from someone down the street, they can’t compete with what we do here. You hear a lot of nightmare stories. Whether a customer has had a boat one hour, one week or one year, when it breaks down, it’s his boat.”

At the time of the interview Phillips was working on an extended warranty for a 2008 580 Sea Ray. “It’s going to cost me about $22,000 to get it up to speed and buy the warranty. But that’s a $650,000 or $700,000 boat,” he says. “I take what I’ve got in the boat and add it to the cost and figure out what we’ll make on top. Ninety percent of the time it works — maybe more than 90 percent of the time.”

There are boats he will not certify. For example, a small 2013 model from another builder with only 30 hours on it had been languishing and received little attention. “That would take me $20,000 to make it worth $25,000,” Phillips says. “It wouldn’t be worth the time.”

It takes cash and a well-trained service staff to run such a program. The dealership, which has about 50 employees, has not laid anyone off in 35 years because of seasonality. Dealerships that lay off technicians seasonally can’t expect to build a thriving team that could handle doing a certified pre-owned program, Phillips says.

“We do everything in-house, and nobody has better technicians — nobody,” Phillips says. “I’m a technician at heart. I’m not a salesperson. You can buy a boat anywhere. But if you buy a boat at Prince William Marina, I go with that boat.”

“You’ve got to stand behind these things,” Phillips says. “Used boats have got a bad reputation, and you’ve got to cure that.”

This article originally appeared in the June 2017 issue.

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