The Economics of Golf Cars – Chet Walsh of Golf Car Specialties

Chet Walsh is “the man” when it comes to golf carts. As the longtime (32 years) Regional Manager for Golf Car Specialties (GCS), a Yamaha golf car distributor based in the Philadelphia Area, Chet has seen it all. An excellent player, from a strong golf family, Walsh played collegiately at Villanova, has won the club championship at Philadelphia Country Club 14 times and the Senior Championship 3 times. He’s also qualified for multiple 10 USGA championships. His father was a 7 time (13 senior & super-senior) club champ and his brother, Brendan is the head professional at The Country Club (MA), host to several US Opens and the famous 1999 Ryder Cup. Chet knows his way around the golf world.

Walsh estimates that golf cars are used for approximately 33% of all US golf rounds and they most definitely represent a significant part of the economics for many golf courses and clubs. The number of golf cars worldwide is estimated at 1.7 million and valued at $2.5 Billion, according to Global Market Insights. GCS also provides a variety of personal, transports and utility vehicles that fit into the golf car category of vehicle. I had the opportunity to pose some questions to Chet on the role golf cars play at courses and clubs. Walsh estimated that 100,000 new golf carts enter service each year.

According to Walsh, purchasing a golf car outright can range from $6,800 to $10,000, while leasing currently runs between $1,200 and $1,800 per year per car. The ranges exist because there are several types of cars, including gas powered and electric models with either Lead Acid or Lithium batteries. The lithium powered cars are the highest cost and the most advanced technology, with the ability to go more than the typical 36 holes (up to 54+) between charges. Walsh estimates a 7 year useful life for the lithium models which typically have a 5 year warranty. Many, if not most clubs lease with an equipment services agreement (maintenance), that typically costs from $100 to $300 per year (usually <$200), depending on the age of the cart and consists of both preventative and reactive maintenance for the fleet.

There are also several options available, the most notable being the standard Top, Windshield, Sand Bottles and Buckets.  In recent years that Golf Bag Rain Covers and Information Holders have become regular add-ons.  The most talked about accessory today is whether or not to add GPS Systems.  Once thought of as a “Resort Only” option, has become a bigger item of discussion in Golf Committee and Green Committee meetings and do they want to commit to the expense in order to control the golf car flow to protect the turf. . The most modern technology includes the aforementioned lithium batteries and automatic hill brakes. Most of us have also experienced the (sometimes frustrating) effect of GPS related “geo fences” which disable the car in certain areas of the golf courses. Walsh discourages courses from being too aggressive in establishing geo fences as the position of satellites and updating capabilities of the unit can actually change the location of the geo fences on occasion.

Walsh shared that there are several ways to acquire a golf cart fleet. These include:

  • Lease to own, typically called a “conditional sales contract”
  • “Operating Lease”
  • A Balloon Payment lease
  • Outright purchase (cash)

Among the first decisions clubs and course owners make is whether to lease or buy their fleet. Walsh indicates that part of this decision depends on the expected useful life of a golf car. He says that electric cars typically have a useful life of 4 years with Lead Acid batteries and 6 years with Lithium. Gas cars are projected to have a 5 year life. Simple math shows us that the outright purchase of a fleet of 60 carts will range between $400,000 and $600,000, while leasing the same size fleet would run between $72,000 and $108,000 per year. Most leases come with a buyout provision at the end of the term. Golf Car Specialties currently promotes the Lead Acid Car over the Lithium Car because of the lower cost and and the lack of need for more than 36 holes a day and most clubs not wanting to keep cars more than 5 years.

A determining factor in the lease buy decision is also how frequently some clubs seek to turnover their fleet, with some simply desiring to maintain a pattern of newer fleets.

With the significant fixed costs of a golf car as illustrated above, there are also variable costs such as gas or electricity, each club needs to recover that investment. Walsh says he’s observed fees in the range of $10 to $40 per player with an average of $30-$35. He notes that some clubs keep the cart fee lower and increase green fees to reduce the tax burden, since green fees and dues are not always subject to sales tax and golf car rentals are..

The revenue impact to a club can be significant. If a course is cart mandatory, charges $30 and hosts 30,000 rounds per year, cart revenue can be $900,000. Even with 50% cart usage, revenues would be $450,000. For a course where carts are mandatory, Walsh suggests a fleet of 75 cars. At a median lease rate of $1,500, the fixed cost would amount to $112,500 and one can easily see the significant profitability. Walsh indicates that for some daily-fee facilities, golf cars are the single largest revenue producer and at private clubs with caddie programs, carts provide a much cheaper option with caddies typically in excess of $100 and golfers (where permitted) are opting for the significantly less expensive cart fee.

Walsh advises those clubs preparing to update their fleet from pre-2022 models should be prepared for sticker shock. He notes that there were 3 price increases in 2022 alone and that those increase have cumulatively resulted in lease or purchase prices for golf cars being about 30% to 50% higher than in 2021. One solution to this impact is to extend terms of leases of conditional sales contracts beyond the warranty period. Walsh observes that the useful life of most golf carts (if well cared for) is up to 10 years, but that many upscale courses and clubs prefer updating their fleets after no more than 5 years to keep things looking fresh.

The contribution of golf cars to a club’s bottom line can be significant. Understanding the options and the economics can enhance a club’s financial performance and add to its market value when it’s time to sell.