Purchasing and "Pricing"

[MikeTuggle]

I hate to post dumb questions but here goes another....

As a Realtor, it is relatively easy for me to "price" a house or a commercial property -- primarily because there are "comparables" available to me.

With planes, we have a couple of tools but no public records of "sold prices" to draw on to do our own calculations.

Just like real estate, making an intelligent offer for a plane should be based on something other than just, "I'll throw the seller a number and see what s/he says, and we'll go from there."

For example, for two virtually identical planes, what should be the $$$ consideration if one has 200 hours since new and one that has 800 since new on an engine that has a 2,000 hour TBO (Lycoming TIO-540-AK1A)? Both have 78/80 compression numbers.

Thanks!

 

[Hank S]

Find a good overhaul price, divide by TBO and you'll have an hourly engine price. The difference will be hours times 600 (in this case).

 

[bflynn]

You can get into the ballpark with vref, it's available as an AOPA member benefit. I think of vref like a Zillow estimate...it's going to be in the ballpark and might even be right. There are many who will say that you need an aircraft broker to help you through the process of both pricing and selling, with an aircraft appraiser thrown in.

The trouble I see there is that you're just adding more people who all have different opinions of the price. The buyer, buyer's appraiser, broker, vref, your appraiser and you will have have differing opinions on the price.

Somewhere in there you thrown in the market factor, like how badly the seller wants to sell and how badly the buyer wants to buy.

 

[Henning]

I hate to post dumb questions but here goes another....

As a Realtor, it is relatively easy for me to "price" a house or a commercial property -- primarily because there are "comparables" available to me.

With planes, we have a couple of tools but no public records of "sold prices" to draw on to do our own calculations.

Just like real estate, making an intelligent offer for a plane should be based on something other than just, "I'll throw the seller a number and see what s/he says, and we'll go from there."

For example, for two virtually identical planes, what should be the $$$ consideration if one has 200 hours since new and one that has 800 since new on an engine that has a 2,000 hour TBO (Lycoming TIO-540-AK1A)? Both have 78/80 compression numbers.

Thanks!

Engine overhaul is the easiest to figure because it is nearly a direct prorate of what the engine costs to overhaul with depreciation ending at core value around 75% TBO.

What s most critical in evaluation is airframe condition, because that is where all the big unrecoverable expenses lie, and even when the repairs are completed, they serve as a deduction in value.

Avionics is where the big gap in valuation between buyers and sellers exists. If it's all previous generation avionics, they are basically worth nothing extra. When you start looking at modern avionics though, buyers want to allow a 10% cost add where as sellers are looking to recover 50% or better.

Houses and airplanes are not in similar markets, airplanes are depreciating assets (actually, for most private owners they are a liability), more like cars than houses.

A good starting reference is the NAAA calculator on Trade A Plane, but it is not a hard value.

 

[LoxaBagels]

Real Estate is different than aircraft buying largely due to volume.

Buying a used aircraft (esp one that's 20 or more years old) is more akin to buying an antique...Unless you are buying new, each plane is going to be more influenced by how desperate the seller is versus how motivated the buyer is for a given plane.

One thing to avoid entirely is any plane without logbooks...unless it's a rare one-of-a-kind survivor and you expect to rebuild it from the ground up.

 

[frfly172]

the avionics usually play a big part in price difference,need to check on the airframe history, any damage history,paint and interior can be a fo actor also. It's what you deem important is what counts in your decision.

 

[James331]

You still can comp the plane, just more of a pain, as you keep a eye on all the for sale sites you will notice which planes are always for sale and which arnt, that helps.

For me I offer what the plane is worth to me, same when I bought my house. Most of the comps on my place were above what I paid, I simply chucked a low ball offer out and went back and forth till I was happy.

 

[ahkahn]

You can get into the ballpark with vref, it's available as an AOPA member benefit. I think of vref like a Zillow estimate...it's going to be in the ballpark and might even be right. There are many who will say that you need an aircraft broker to help you through the process of both pricing and selling, with an aircraft appraiser thrown in.

The trouble I see there is that you're just adding more people who all have different opinions of the price. The buyer, buyer's appraiser, broker, vref, your appraiser and you will have have differing opinions on the price.

Somewhere in there you thrown in the market factor, like how badly the seller wants to sell and how badly the buyer wants to buy.

Vref is a joke. It priced my plane about 50% over what the "going" asking prices were. I've priced Mooneys using the Mooney pricing tool that is compiled by a Mooney group, as well as with Vref, and the Mooney group's calculator is MUCH closer than the Vref pricing.

Regardless, typical plane pricing is 1/3 airframe life, 1/3 engine time, and 1/3 avionics offering. Compile a spreadsheet of every like plane you see, drop the bottom 2 or 3, and the top 2 or 3, then arrange by hours airframe and hours engine. You'll see how it all shakes out.

 

[docmirror]

Selling price is a problem with aircraft and cars. However, there are tools avail to 'spec' both for pricing. Kelly blue book, Edmunds, and several other companies use a fairly complex linear equation to value cars. The Vref uses a similar algorithm but it is horribly skewed.

I wrote me own for planes about 15 years ago. At first, my R^2 value was crap, down around .55 to .7 depending on model. And - the toughest part was that I had no data on purchase price, only sales prices! However, it was good to use as a predictor of which planes were well overpriced, and which planes were well underpriced.

As I tweaked the equation, my R-squared values got modestly better, and I learned a heck of a lot about condition expressed as a function of inspection. You can do a google search for Excel and linear equation, or maybe called regression analysis. It's not too hard to put the data in excel and let it do the hard math for you. Just be careful of what you are using for dependent values, it gets tricky. Here's a quick sample of my elements, but it is not exhaustive:

Price = age + air_hours + eng_hours + prop_hours + ext_cond(N) + int_cond(M) + GPS + IFR_cert + (speed/fuel) + options(P)

Where N, M, P are scalars based on 1-100. Of course, some of the coef will be negative. Look for coef which are very high, and adjust the characterization accordingly. You don't want to see one element of the regression causing the bounding of the graph-plot to be skewed so far that it dominates all the other elements.

It takes some work, but I did it, and got my R-squared up over .8 which I considered to be useful, and eventually predictive. Not much fun as glomming though Barnstormers, but maybe for math geeks it might save a few bucks. Mainly it will keep you from falling in love with a toad before you write the check.

 

[James331]

Vref is a joke. It priced my plane about 50% over what the "going" asking prices were. I've priced Mooneys using the Mooney pricing tool that is compiled by a Mooney group, as well as with Vref, and the Mooney group's calculator is MUCH closer than the Vref pricing.

Regardless, typical plane pricing is 1/3 airframe life, 1/3 engine time, and 1/3 avionics offering. Compile a spreadsheet of every like plane you see, drop the bottom 2 or 3, and the top 2 or 3, then arrange by hours airframe and hours engine. You'll see how it all shakes out.

Where do people get these silly formulas.

So if it's low time with a bare bones VFR panel and sun cooked interior and paint it's worth more than a slightly higher time cherry plane with full leather wet looking paint /G aircraft with a GPSS and 3 axis AP?

 

[Henning]

Where do people get these silly formulas.

So if it's low time with a bare bones VFR panel and sun cooked interior and paint it's worth more than a slightly higher time cherry plane with full leather wet looking paint /G aircraft with a GPSS and 3 axis AP?

That does seem to be the current market thinking, and they should all be equally priced as the corroded up, run out rag.

 

[JHW]

For example, for two virtually identical planes, what should be the $$$ consideration if one has 200 hours since new and one that has 800 since new on an engine that has a 2,000 hour TBO (Lycoming TIO-540-AK1A)? Both have 78/80 compression numbers.

Thanks!

for me, there's far more to it than engine times. I'd go look at both airplanes, take covers off and poke around. I'd find things i do and don't like about each and decide what I'm willing to pay. What I'm willing to pay doesn't have to be in any way related to what you are anyone else are willing to pay. At any rate, the purchase price is just the cover charge, you haven't even sat down at the bar yet.

 

[nddons]

Selling price is a problem with aircraft and cars. However, there are tools avail to 'spec' both for pricing. Kelly blue book, Edmunds, and several other companies use a fairly complex linear equation to value cars. The Vref uses a similar algorithm but it is horribly skewed.

I wrote me own for planes about 15 years ago. At first, my R^2 value was crap, down around .55 to .7 depending on model. And - the toughest part was that I had no data on purchase price, only sales prices! However, it was good to use as a predictor of which planes were well overpriced, and which planes were well underpriced.

As I tweaked the equation, my R-squared values got modestly better, and I learned a heck of a lot about condition expressed as a function of inspection. You can do a google search for Excel and linear equation, or maybe called regression analysis. It's not too hard to put the data in excel and let it do the hard math for you. Just be careful of what you are using for dependent values, it gets tricky. Here's a quick sample of my elements, but it is not exhaustive:

Price = age + air_hours + eng_hours + prop_hours + ext_cond(N) + int_cond(M) + GPS + IFR_cert + (speed/fuel) + options(P)

Where N, M, P are scalars based on 1-100. Of course, some of the coef will be negative. Look for coef which are very high, and adjust the characterization accordingly. You don't want to see one element of the regression causing the bounding of the graph-plot to be skewed so far that it dominates all the other elements.

It takes some work, but I did it, and got my R-squared up over .8 which I considered to be useful, and eventually predictive. Not much fun as glomming though Barnstormers, but maybe for math geeks it might save a few bucks. Mainly it will keep you from falling in love with a toad before you write the check.

Wow. Math geek.

 

[ahkahn]

Where do people get these silly formulas.

So if it's low time with a bare bones VFR panel and sun cooked interior and paint it's worth more than a slightly higher time cherry plane with full leather wet looking paint /G aircraft with a GPSS and 3 axis AP?

Not what I was saying. What I was saying is that if you have 3 of the same make/model planes, all 40 years old, one with a 2000 hr. airframe, 2000 hr. engine, and modern avionics suite, it would be of similar value as the one with 2000 hrs airframe, 0 hr. engine, and original avionics, while they would also be of similar value to one with a 10,000 hr. airframe, 0 hr. engine, and new suite of avionics.

Overly simplified, but hopefully you get my point.

 

[JHW]

Not what I was saying. What I was saying is that if you have 3 of the same make/model planes, all 40 years old, one with a 2000 hr. airframe, 2000 hr. engine, and modern avionics suite, it would be of similar value as the one with 2000 hrs airframe, 0 hr. engine, and original avionics, while they would also be of similar value to one with a 10,000 hr. airframe, 0 hr. engine, and new suite of avionics.

Overly simplified, but hopefully you get my point.

I don't see that at all. In fact that's utter nonsense.

 

[Cruiser]

The biggest fallacy in all this "pricing comparison" is assuming that the last guy's price was the "correct" price. Who cares and why is it important to know what the other guy paid?

As far as "depreciating asset" show me one 1975 Mooney M20F (or insert your make/model here) currently listed for less than the original selling price......

 

[ahkahn]

I don't see that at all. In fact that's utter nonsense.

Well, I guess our experiences must be very different. Please explain how you've seen planes valued?

 

[Henning]

I don't see that at all. In fact that's utter nonsense.

It's insanity, however as sellers can attest, it is the reality of today's market. Basically you have to give away your premium airframe and all your improvements just to sell your plane at the price of the biggest POS listed on the market, which will never sell. Today's market is all about taking advantage of people trying to get out from under their plane.

 

[James331]

I don't see that at all. In fact that's utter nonsense.

Agreed

Look at what comparable ones, which are moving, are going for, figure out what that plane is worth TO YOU, make a offer a little lower and play the negotiate game.

Really not that complicated, nor does it require flow charts or silly equations.

 

[docmirror]

Several people here have expressed opinions on the fourth or fifth StdDev type planes, and the errors associated with those units. This is true of any population, and it wreaks havoc with modeling data and analysis.

Frex; You are shopping a 1959-1964 Cessna 172 model. So, you find one that has 650 hours on it, with a new engine just installed, full IFR, retrofit with glass, and some fancy kind of 2 axis AP, interior better than new, and always been hangared since new. Basically a 60YO time capsule plane. The predictive model using statistical analysis won't work well at all. More to the point, using it in the regression will produce some wacky screwed up coef and mess up the modeling.

What you need to do decent price prediction is a large group of similarly qualified elements. Each time you add another group of independent variables to the matrix the equation gains a better dependent(price) fit. It 'learns' if you will, the predictors of what is valuable, and what isn't valuable to the market.

So, in closing - don't use the outlier examples to try predicting with any kind of confidence. But, you can use it for a large segment of price prediction when the sample size is oversquare(more sampled planes than there are elements in the equation).

 

[JHW]

Well, I guess our experiences must be very different. Please explain how you've seen planes valued?

if the planes are of eqyal condition (and they won't be, but say they are) you can't put enough blinky lights in the panel to offset 4X the airframe time, especially not in a coming age of arbitrary and capricious inspections based on hours. IMO that time is coming in America, whether we like it or not. We already have it here in australia.

 

[hindsight2020]

if the planes are of eqyal condition (and they won't be, but say they are) you can't put enough blinky lights in the panel to offset 4X the airframe time, especially not in a coming age of arbitrary and capricious inspections based on hours. IMO that time is coming in America, whether we like it or not. We already have it here in australia.

My hope is part 23 re-write liberates us certified slowcan drivers from the death by a hundred paper cuts that is the current system of recurring AD inspections.

 

[MikeTuggle]

For example, for two virtually identical planes, what should be the $$$ consideration if one has 200 hours since new and one that has 800 since new on an engine that has a 2,000 hour TBO? Both have 78/80 compression numbers.

Sorry... I should have been more clear. One plane is a 2007 model (with 800+ hours) -- the other is a 2011 (with ~200 hours). The differential in "asking prices" is almost $75k.

 

[docmirror]

Sorry... I should have been more clear. One plane is a 2007 model (with 800+ hours) -- the other is a 2011 (with ~200 hours). The differential in "asking prices" is almost $75k.

If the differential is based on an asking price of $750,000, then it's only 10%. Well within the parameters of changes represented by engine time, or electronics.

 

[Mark Kelmar]

$10,800 for the 600 hour engine (540) difference, $9,600 for the airframe time difference. On newer aircraft the airframe time allowance is a much higher $per hour then on older airframes. The 4 year newer airframe(2011 vs. 2007) adds a lot of value when it's that new, a lot more than the difference between say a 1975 and a 1979 airframe.
If this is a 182T for instance, a 200 hour 2007 will be about about $275,000, a 2011 182T with 200 TT will be approx. $350,000. Factor in the extra 600 hours on the 2007 airframe and engine, then the 2007 should have a market value of approx. $255,000.00.

 

[JHW]

let's look at a more typical example

beech travel air bought for $55k

then:
paint 18k
new props 21k
IFR GPS and related, 3k
interior 2K
misc changes and upgrades 6k

current market value 55k

would I do that again? heck yes. I bought the best airframe i could find and made it into the airplane I want. I love tinkering with my planes and I'll keep pouring money and time into this one, there is always something that can be made better.

these are toys, not investments
these are toys, not investments
these are toys, not investments

repeat until that sinks in

 

[James331]

If it needed all that I wouldn't have wanted to buy it for a cent over 20k.

Always found it cheaper to buy more of a turn key plane, maybe through some HIDs on and some other little thing, but the big ticket items, man... unless it's a steal it's just not worth it IMO.

 

[JHW]

I bought the best condition and lightest (limited to 58-59 for me) airframe I could find. It took me 3 years to find the one I wanted. Lots of damage and corrosion in the old ones, I bought the 13th one that i inspected in person.

I also bought it at something of the top of the market, before the 2009 situation

The right airframe is all that matters. All that other stuff - interior, paint, engines, props, avionics, those are just attachments to be tweaked and changed per your whims.

 

[James331]

I bought the best condition and lightest (limited to 58-59 for me) airframe I could find. It took me 3 years to find the one I wanted. Lots of damage and corrosion in the old ones, I bought the 13th one that i inspected in person.

The right airframe is all that matters. All that other stuff - interior, paint, engines, props, avionics, those are just attachments to be tweaked and changed per your whims.

Indeed.

However I wouldn't pay near turn key full market price for basically a ruff but true airframe and cores.

End of the day, as long as you're happy there ya go

 

[JHW]

Indeed.

However I wouldn't pay near turn key full market price for basically a ruff but true airframe and cores.

End of the day, as long as you're happy there ya go

55k was 1/3-1/2 of "turn key" price at the time. In case you haven't noticed there has been something of an adjustment in airplane prices in the last 7-8 years

 

[MikeTuggle]

.... If this is a 182T for instance, a 200 hour 2007 will be about about $275,000, a 2011 182T with 200 TT will be approx. $350,000. Factor in the extra 600 hours on the 2007 airframe and engine, then the 2007 should have a market value of approx. $255,000.00.

Add $50K and you just nailed the asking prices...

Thanks!