Thursday, July 2, 2009

The Jet Ski Trap

Jet skis lose their allure rather rapidly.

I pick on Jet Skis as sort of the epitome of silly purchases that end up squandering a lot of hard earned money. While I use them as an easy example, other types of purchases could fall along similar lines. Speed boats, "crotch rocket" motorcycles, snowmobiles, and ATVs come to mind as similar wasteful purchases. What these scenarios have in common is:
1. A seasonal or hobby item that is not really necessary to daily living.

2. An item financed (usually at a high interest rate) with "E-Z Monthly Payments"

3. An item that depreciates dramatically.

4. An item that loses its allure rather quickly.

5. An item that needs constant maintenance that the owner cannot provide.
Let's see how these aspects combine and collide in an all-too-typical example of the Jet Ski purchase.

Jeff (who is a real person, by the way, names changed to protect the innocent) is a well-off middle class suburban dweller. He is married and he and his wife have decent incomes working in office environments. While Jeff is very skilled in his narrow field of interest, he literally cannot change a light bulb without cross-threading it half the time.

On vacation, he rents a Jet ski for an hour, and on the ocean in front of the resort he is staying at, it seems like a lot of fun - jumping the waves in the hot summer sun. All too soon the hour is over, leaving him wanting more. If he had just rented for that second hour, he probably would have gotten Jet Skiing out of his system, as he realized that there is not a lot more to do, other than what he already had been doing.

On return from vacation, Jeff proposes to Marsha, his wife, that they buy Jet Skis. He's seen the ads in the paper, and for what he paid for an HOUR to rent a Jet Ski, he could make a monthly payment on one!

They set off to visit the Jet Ski dealer. Jeff did not do any research first, comparing prices and features and also figuring out what these things were worth.  He also did not research the price of used Jet Skis in the local classifieds or

The Jet Ski dealer was all too happy to see them on a busy weekend.  Jeff was immediately drawn to a display of two jet skis on a trailer in the middle of the showroom.  A large sign proclaims "Low monthly price! As low as $199 a month!**". This sounds too good to be true, and as Jeff will later learn, it is.

Of course, that was the price for only one Jet Ski. The monthly payment for two was twice that. And of course, the Jet Skis will need a trailer, which the dealer is happy to sell them. Lightweight Jet Ski trailers cost only a few hundred dollars to make.  But to Jeff, who has no idea what things cost, spending $2000 on a trailer seems like a reasonable proposition, as does spending $10,000 on a Jet Ski. Jeff and Martha leave the showroom having spent as much as, if not more than, they would have on a new car.

Of course, the Jet Skis will need to be registered and insured, and Jeff is shocked to realize that insurance is rather high for these items. He also has to take his car in to have a hitch installed and trailer light wiring installed. But within a week, all the loan paperwork is done and Jeff is pleased to go pick up his Jet Skis and head off for a weekend adventure! No mere hour-long rental, but a weekend full of Jet Skiing fun!

Jeff and Martha head over to the local lake and discover there is a long line to launch their Jet Skis on a Saturday morning. They finally get the Jet Skis in the water and after some initial messing around, take off from the dock. Other boaters angrily wave at them as they fly out of the launching area, oblivious to the no wake zone signs and roped swimming area.

Jeff and Martha discover the first negative about Jet Skis - other boaters hate them. Local landowners are annoyed by their loud buzzing sounds, and traditional boaters annoyed by their erratic unskilled and often unsafe drivers.

With a simple twist of the throttle, Jeff is now doing close to 70 mph on the water - a fairly staggering speed, considering most boats travel only 30 mph or so. He suddenly realizes that he is on a collision course with a bass boat. Panicked, he lets go of the throttle and tries to turn. With a horrible sinking feeling and pit in his stomach, Jeff realizes that the Jet Ski is still headed straight for the bass boat. Jeff discovers another problem with Jet Skis - when you release the throttle, they lose all directional control.

Fortunately for Jeff, the bass boat driver, having seen this scenario before, takes evasive action and avoids a deadly collision. Jeff is lucky. Every year, thousands of other Jet Skiers are not so lucky, and are either killed or maimed in such collisions. It is small wonder that insurance on these seasonal items can be so high.

Jeff learns his lesson and slows down and learns to take evasive action before coming close to boats or objects in the water - or land. He and Martha head off to an area where there are no boats and try out the new Jet Skis. They turn left and make circles. They turn right and make circles. They turn left. They turn right. Jeff comes to the realization that this wasn't as much fun as he thought. They have been on the water for only a half-hour, have pissed off all the other boaters in the area, and basically are having no fun.

There are no waves to jump, Jeff thinks, and after watching some other Jet Skiers, decide to find some boat wakes to jump. they follow a cabin cruiser throwing up a good wake and try to jump it. However, the jet skis do little more than bump over the two-foot wake and the boat's captain gives them an angry glance as they ride too close to his boat.

They ride some more. There has to be some fun in this, Jeff thinks, remembering the time at the resort. Or has he really "been there, done that" already? Having spend over twenty thousand dollars on these Jet Skis, he gets a sinking feeling, and thinks about the 59 months of payments ahead of them.

Martha sees an isolated section of water across the lake and suggests they head over there. They gun their engines and floor it across the lake, throwing up rooster tails. When they arrive, Jeff feels that maybe they have found the "fun" part, doing S-turns among the reeds in the shallow water and watching flocks of geese take flight ahead of their Jet Skis. But suddenly, Jeff's Jet ski sounds an alarm and slows down. The grasses have wound around the impeller and stalled the engine.

Martha pulls along side and Jeff looks under the seat, mystified as to how to correct the problem. Soon another boat arrives and Jeff is optimistic that help is on the way. Unfortunately, the boat is the local Environmental Conservation Sheriff, and Martha and Jeff are ticketed for riding their jet skis through a bird sanctuary and also violating wake zone rules. "I've had a number of complaints about you two" the Sheriff says, handing them the tickets. Jeff explains that they just bought the Jet Skis and the Sheriff shakes his head. He's seen this scenario many times before.

Using a short rope, Martha tows Jeff's Jet ski back across the lake. While it took them only minutes to get across under power, towing takes nearly an hour, as every time Martha tries to accelerate, Jeff's ski starts to swamp.

They get the Jet Skis on the trailer and leave, sitting in silence in the car on the way home. "Maybe next time will be better," Jeff says.

And it is, of course. They get the impeller unclogged at the dealer and Jeff learns a few basic maintenance procedures, like how to add oil to the oil injection system. The dealer is in no hurry to educate Jeff, because each costly mistake Jeff makes, out of ignorance, is another profitable transaction for the dealer.

They try other lakes and rivers and, having learned not to annoy other boaters and how to read the various signs and buoys, largely stay out of trouble. They take the Jet Skis to the beach and run them in the ocean water, which brings back a lot of the fun from their vacation. But still, it is not the continuous orgasm than Jeff expected, just a series of chores and tasks to get ready to go and to return - packing and unpacking equipment, food, beverages, and the like.

Unfortunately, Jeff hasn't learned half of the chores he needs to do. On the way back from one beach adventure, he is appalled when a wheel rolls by his car window - a wheel from his Jet Ski Trailer. It bounces across the median and narrowly misses an oncoming car. Jeff is lucky. Many more are not. Such wheels can pass through a windshield and kill an oncoming driver - it happens every year. Regular maintenance on a trailer is essential, and Jeff hasn't even washed his trailer since buying it.

Pulling off the road in a shower of sparks, he realizes that the wheel has fallen off his trailer. Having no spare, he leaves the now-crippled trailer by the side of the road and sets off to find a replacement wheel.

However, it is Sunday, and most of the stores are closed. Not knowing the wheel and tire size anyway, he has no idea what tire to get. He finally calls a tow truck to come out and pick up the trailer. Even if he had a spare, it wouldn't have made a difference. Since Jeff never lubricated the hubs on this trailer, the salt water attacked the bearings and cause the axle stub to shear off. Not only did Jeff need a new wheel and Tire, he needed a new axle as well. This scenario plays out with predictable regularity on the roadways of the USA. On any given Sunday, you'll find at least one similarly crippled Jet Ski trailer on the side of any Interstate Highway.

Since the trailer is not covered by his roadside assistance, he has a hefty $400 towing bill to pay, as well as the repairs to the trailer. Jeff is discouraged. Maybe they should sell the Jet Skis. After owning them a year, he goes online to see what he can get for them.

Jeff is shocked. He checks the local classifieds, the local, and the NADA used boat values. The retail value for his Jet Skis is thousands less than he owes on the loan. He calls the dealer he bought them from. The dealer is all too willing to take them back - as a trade-in on a newer, more expensive model, provided the deficit in the payoff is folded back into a higher interest "negative equity" loan on the newer models.

If Jeff wants to sell his Jet Skis, he'll have to PAY $3000 to get rid of them. Since he lives as a "salary slave" from paycheck to paycheck, he doesn't have $3000 to pay off the deficit on the loans when he sells the Jet Skis - if he can sell them at all.

So the Jet Skis sit on the trailer in his side yard, gathering mildew and algae, while the trailer tires go flat. Martha has lost interest in Jet Skiing, particularly now that a baby is on the way. Jeff, too, has found Jet Skiing to be less than he thought it would be.

Unfortunately, the Jet Skis continue to depreciate faster than the balance on the loan declines. Jeff and Martha make five more years of payments on this expensive mistake. Sitting in the side yard, unused, the engines languish, the vinyl upholstery fades and cracks, and all the rubber pieces start to craze and rot.

High revving two stoke engines rarely last long anyway, which is one reason Jet Skis depreciate so quickly. Few jet skis are still around that are more than five years old. You may see some brave soul with some engine fix-it experience nurse one back to life. But for the most part, they crash and burn after a relatively short life.

Jeff and Martha donate the Jet Skis to a local charity for a tax write-off once the loan is paid off. The charity sells the Jet Skis and trailer at auction. The Jet Skis are sold for parts by their new owner, who is interested only in the trailer - which he uses to haul his lawnmower, after mounting a piece of plywood to it.

What was the overall cost of this financial fiasco to Jeff and Martha? In addition to the $22,500 paid for the Jet Skis and trailer, there is the staggering $10,000 in interest payments. Throw in repairs, registration, property taxes, and the like, and you have a bill of $40,000 or more for few weekends of fun. Jeff and Martha can ill afford such waste, particularly that they now have children.

Could Jeff and Martha done anything differently to prevent such a scenario? Yes.

To begin with, they could have just said "no" to buying a Jet Ski. While renting one may seem expensive, in terms of cost per hour, it may be cheaper overall. Moreover, you are not committed to years of payments for something that might only catch your fancy for a few days or weeks.

They might also have looked at buying a real boat. For less than the cost of a jet ski, Jeff and Martha could have owned a small boat. While a Jet Ski provides you with minutes of endless fun, turning left and turning right, you can do much more with a boat. You can fish from a boat, waterskii, wakeboard, tube, camp, cruise, party, or whatever. You can invite your friends on a boat - or family members. Moreover, a regular boat depreciates more slowly than a jet ski.

They also should have looked into paying cash for such a purchase, buying the Jet Skis secondhand. Since there are so many Jet Skis out there like Jeff and Martha's, where the buyer loses interest fairly quickly, you can buy them relatively new and in good shape, for a lot less than new ones. But you have to find a seller who is not "upside down" on his loan, and since these are hard to finance if you are not going through a dealer, you generally have to pay cash.

Frankly, for such a luxury purchase as a Jet Ski, boat, RV, or whatever, it probably is a good idea to pay cash. That way, you are less at risk of being "upside down" on a loan, and can dispose of the item at any time, regardless of how badly it has depreciated.

It is better to sell a used Jet Ski for half of what you paid for it, than to make 6 years of payments and then sell it for scrap. Yet this latter scenario is played out in back yards all across America - as consumers pay off loans on RVs, Boats, Jet Skis, Motorcycles, and the like. Now that the recession has hit - and hit hard - you cannot give away luxury items like these. But it is a good time to pick one up - secondhand.

Lastly, Jeff and Martha should have taken the time to learn how to maintain such equipment. You CAN own "toys" like a Jet Ski or a motorcycle or an RV or a Boat, on a budget, provided you don't have to run off to a dealer every time it breaks. If you cannot take care of an item to prevent it from breaking, and if you cannot do basic maintenance on an item when it needs maintenance, then maybe you should re-think owning luxury items involving machinery.

Jeff and Martha learned an expensive lesson relatively early on in life. But one wonders, when you consider the educational background both Jeff and Martha have, why they would make such a costly mistake at all?

* * *

P.S. - while the plural form of Ski was, I thought, Skiis, it appears the plural of Jet Ski is Jet Skis, which makes no sense to me and sounds like it would be pronounced "Jet Skiz". "Personal Watercraft" is the generic term, but rather awkward.

UPDATE April 2015:

I got the Jet Ski thing out of my system in a day.  A friend of ours loaned us two Jet Skis in Ft. Meyers Beach, Florida, and we took them out for a day - going through the mangroves, the back channels, the beach, and into the ocean, where yes, I got one airborne with "one hand on the controls!"  But after a few hours, it was like, "Is that all there is?"   That and how scary-fast these things went (I am a boater, and respect speed on the water).  I am glad I tried it.  But no, I don't need to spend $20,000 on  a pair of them.

Daniel Tosh's famous "waverunner" bit.  We all miss your Cousin!