This article was written by Mike Simmons, President of Plane Data, Inc. and originally published in the February 2002 edition of The Aviation Consumer.
Setting the right price for a used aircraft can be complex and often debated among enthusiasts. Whether you’re selling, buying, or evaluating a plane for insurance or tax purposes, it’s crucial to consider all factors in determining its market value. Many buyers and sellers forego a formal appraisal, considering it a completely unnecessary expense. In this blog post, we’ll discuss the elements determining an aircraft’s value and why you need more than a published value guide to set a fair price.
Understanding the Real Value
While an owner’s emotional attachment to an aircraft is understandable, it’s essential to recognize that its worth is determined by what someone is willing to pay and not an owner’s sentimental appraisal. You’ll want to be able to assess and document the airplane’s worth based on facts.
Key Factors Influencing Value
The actual value of an aircraft lies in its airframe’s structure, engine, damage history, and maintenance. Although most first-time buyers shy away from damage history, veteran owners don’t seem to mind as much if the repair was done properly, is well documented, and the price is adjusted accordingly.
Panel, Engine, and Propeller Value
The panel’s avionics package, engine type, time since overhaul, and quality of overhaul all play a role in determining value. Recent compression readings and oil analysis can enhance an aircraft’s appeal.
Maintenance and Modifications
Ensuring that all maintenance and modifications are documented, and up-to-date is essential. Buyers expect compliance with ADs, service bulletins, and proper documentation.
The most common evaluation mistakes
Putting the wrong value on the avionics package,
Rating the airplane’s overall condition
Rating the paint and interior,
Putting a value on installation labor and routine maintenance
Even if new or recently installed, avionics equipment doesn’t significantly impact the aircraft’s market value. New installations contribute to the avionics package’s overall value but don’t equate to the total retail price. The age of avionics matters less than their condition and functionality. Think of it like driving a new car off the lot. Avionics gear loses value once installed.
Assessing Aircraft Rating
Subjectively rating an aircraft’s overall condition can be confusing. For example, a Cessna 172 rolling off the line is average for a 2002 model, yet few owners would want to describe their brand-new airplane as a 5. Most owners would call it a 10. Comparing the airplane to “average” may work better for old airplanes, where the range of conditions might be broader.
Instead, using terms like “excellent,” “very good,” “good,” or “poor” provides a more precise description.
PRO TIP: Gather all the appraisal points and make the best estimate possible.
Considering Labor and Maintenance
Labor and routine maintenance have no intrinsic market value. The marketplace presumes that the owner keeps the aircraft in an airworthy condition. Yet sellers quickly note such attributes as “extensive” annuals or major repairs just done as a selling point.
An aircraft that has just gone through an annual will command a slightly higher value since buyers typically pay less for routine maintenance or repairs that have been performed. While recent annual inspections can add more value than if it would need an annual inspection a few months down the road, a thorough pre-buy inspection is still crucial.
Under no circumstance should you consider buying an airframe without an independent pre-purchase inspection.
Examining Cosmetic Improvements
Cosmetic enhancements like a new paint job or interior can improve the aircraft’s appearance but might not significantly increase its sales price. New cosmetics can be an attempt to hide flaws, and trendy or unusual paint jobs may be harder to sell. The quality of work also varies widely. The real value lies in the airframe’s structure, the engine, and evidence that the airplane has been well cared for.
PRO TIP: focus more on the airframe’s overall condition. The condition of the airframe deals with items such as the fit and finish of the panels, surface corrosion, dents and dings, and landing gear.
It’s possible to have a terrible airframe and a great paint job. Conversely, it’s also possible to have a poor paint job but an airframe in excellent condition for its age.
Using Price Guides
Putting an actual dollar value on an airplane needs to consider all of the above points, but how they’re weighed depends partially on the method used to calculate the airplane’s value. Price guides offer valuable data but are often 3-6 months behind current figures therefore, their reliability and limitations should be considered. They provide a general framework for evaluation but may not account for specific aircraft details.
Another method uses classified advertisements to set the starting point. While more accurate than picking a number out of the air, a classified ad relies on the ad to have accurate data and capture all value points. Sellers and brokers who publish ads about their aircraft tend to gloss over any key value points that are negative. As a result, the aircraft tend to be priced higher, resulting in an artificially inflated price.
Opting for Professional Appraisal
A professional appraisal by a certified appraiser is recommended for the most accurate assessment. This involves a site visit to thoroughly examine the aircraft, documentation, and systems, providing an unbiased and comprehensive evaluation. Anything less means you’re getting a market analysis and not an appraisal. In other words, the evaluator gathered information from someone else who may or may not have first-hand knowledge about that aircraft, or the details could be obtained from someone who is most likely biased in some way.
Plane Data Inc. is proud to be a member of the Professional Aircraft Appraisal Organization (PAAO), the leading organization in appraising aircraft. The IRS, U.S. Customs Service, and other state and federal agencies accept PAAO Certified Appraisal reports due to their reputation for detail and accuracy.
Whether you rely on price guides or opt for a professional appraisal, determining an aircraft’s market value involves carefully considering various factors. Ensuring that all relevant value points are captured and using up-to-date data is vital to accurately determining an aircraft’s worth.
If you’re looking to purchase or sell your aircraft and want an opinion of value you can rely on, fill out the form below. We’d love to help.