Buying In

The Market: What's It Really Worth?

March 1, 1996

Establishing the value of used aircraft

Many first-time buyers probably envision a tricky, underhanded, cigar-chomping salesman wearing a white belt and white shoes. Luckily, most aircraft salespeople don't fit that "Crazy Eddie" car- salesman stereotype. Many salespeople are like you and me — people who want to make a living that involves general aviation, people who would like to see the business flourish. If prices of used aircraft are any indication, the used market is flourishing. Deals, as well as ripoffs, are out there. Distinguishing between them can be tough. Remember, it takes more than a pretty paint job to cover up the true junkers.

These days, used piston aircraft prices are on a steady rise. For the buyer, this is good news and bad news. The entrance fee to become a member of the ownership fraternity will initially be higher; but the good news is that, if the price trend continues, your airplane will rise in value. In fact, some airplane values have risen so rapidly that they make even the hottest stock look like a conservative certificate of deposit.

For example, in the latest edition of Vref, one of two pricing books available to those in the aircraft sales and appraisal business, the average price of a 1986 Cessna 172P (the last year of Skyhawk production in the United States) is $72,000. Its value rose $8,000 (more than 11 percent) in the third quarter of 1995 — that's a rate of return even a hot-shot Wall Streeter would wish for. On the twin side, Cessna's 1975 through 1980 310Rs, which are valued at $120,000 to $143,000, yielded similar gains and appreciated 12.5 percent in one quarter. Keep in mind that these figures are the average prices; some aircraft sell for far more — and others for far less.

Currently, there is a large price spread between the clean airplanes and the doggy ones, said Fletcher Aldredge, editor of Vref. In a synopsis sent with a copy of Vref, Aldredge cites an example of two Beech Baron B55s. The asking price for one, "a low-time, superclean" 1981 model, was $200,000 — $30,000 above average. The other was a 1973 model described as "only bellied-in tires" — the asking price for which wasin the mid-$30,000 range, or $60,000 below the average. Well-maintained or refurbished late- model airplanes are commanding high prices, while the dregs decline in price even further.

If you're a first-time buyer, you might consider purchasing through a dealer. A dealer generally has done a fair amount of legwork in making the airplane "market-ready," said Aldredge. Compliance with airworthiness directives (ADs) and mandatory service bulletins, and all other necessary work, will be done to make the airplane sellable. Also, if nothing else, there is an establishment to which you can return the airplane if there's a problem. Buying from a dealer should not relieve you of the need for a prepurchase inspection by an independent mechanic, however.

Whether you choose to go at it alone or use a dealer, consider the following steps as you evaluate aircraft.

Liberally search through trade publications. Pore over Trade-A-Plane or A/C Flyer for the type of aircraft you want with the equipment you desire. It is also a good idea to gather as many articles from trade magazines and type-specific newsletters as possible. These will alert you to problems that are commonly found in that particular make and model. AOPA can provide articles regarding specific aircraft that have appeared in AOPA Pilot magazine.

Be wary of bogus engine overhaul claims. An ad that lists an engine with 800 hours SMOH (since major overhaul) and 50 STOH (since top overhaul) should raise an eyebrow. This could indicate an abused or neglected engine that can't even achieve half of its TBO run. As a result, the seller has elected to perform a top overhaul in order to get the engine to run within tolerances. Instead of a major overhaul, which involves splitting the crankcase, a "top" generally involves replacing certain top-end components like valves; valve guides; pistons; rings; and, often, entire cylinders. This seller may be running the engine incorrectly, which requires frequent top overhauls. In cases like this, it is advantageous to be buying from a private party because you can fly with the seller to see how he or she operates the airplane.

If you consider yourself savvy in the operation and care of airplane engines, you may want to buy an airplane with a run-out engine. The high-time engine will give you a bargaining position for a low purchase price; then, when overhaul time comes, you can break in the new engine for yourself and know the engine's history from day one. If you're confident in the seller, you may prefer to buy an airplane with a new engine and not have to deal with the downtime and expense of an impending engine overhaul. It's up to you.

Learn the terminology in the ads and be wary. If an airplane has a low total time, it can be just as bad or sometimes worse than a high-timer of the same vintage. If the ad says "all original...only 800 hours total time!" for a 1965 Cessna 150, be aware of the effects of inactivity. You can bet that the engine, although far from its TBO, will have a good bit of corrosion from sitting so long and will not achieve the published TBO. The airframe will probably have some corrosion, and birds or animals may be calling the hangar queen their home.

Be aware of terms like "fresh annual" or "new paint." With a recent annual, the seller is hoping a buyer will be attracted to the fact that it will be a year before he or she uncovers any major problems. Unless specified in the logs, you may not know who performed the annual or whether the mechanic chose to defer a mandatory service bulletin or AD until the next annual (yours).

New paint can cover an existing corrosion problem that may take months or years before it rears its ugly head again. Beech buyers should be especially wary of this. The magnesium control surfaces that make up most Beech ailerons and elevators are especially prone to corrosion, and few shops specialize in painting them. New paint also can cover previous damage repaired with body filler.

Research the "intangibles." Intangibles are simply the little things that mean a lot. How does the airplane look to you? Is there any sex appeal or ego-boosting qualities that you must have? What some airplanes lack in looks is made up in terms of performance. Take a Cessna 182, for example. Not sexy; no blistering speed, either — but it is a practical bird that can take four people and their stuff to remote destinations in a fraction of the time that a car would require. That's what most people want in an airplane, right?

One dealer we spoke to considered where the aircraft was based as an intangible. For example, was the airplane based in Florida? If so, expect it to have more airframe corrosion because of the high humidity and corrosive sea air. If an airplane was based in Arizona or other arid climates, expect minimal corrosion but more sun damage if the aircraft was stored outside. If the airplane is from a cold environment, you can bank on the engine's not achieving TBO, in part because of the frequency of engine-damaging cold starts.

Who maintained the aircraft? The aircraft maintained by its owner under the supervision of a no-name A&P mechanic may not command the same money as the aircraft that's maintained by a reputable shop with a manufacturer's name in its title. Although the owner/mechanic team may have been more careful and thorough than the big-name shop, the buyer has no reputation to bank on.

Get a thorough prepurchase inspection. This is one of the most important aspects of the buying process. The prepurchase inspection will inform you as to what you're buying, from a mechanic's point of view. It can also point out what you can expect to pay in the future in terms of maintenance. With a thorough prebuy, many of the above- mentioned problems can be discovered.

Seek out a mechanic who knows the make and model in question. There is no sense in having a Beech specialist perform a prebuy on a Piper Archer. A mechanic familiar with the type in question will automatically go after trouble spots from memory, eliminating hours of labor time looking up ADs on the microfiche screen. True, you will have to spend a few hundred dollars on the inspection; but if the mechanic finds a cracked tail spar, you'll have saved thousands in the long run.

As with any major purchase, always leave yourself an out and consider the purchase price as just a large step in the cost of ownership. Taking the time and effort to make sure you get what you're paying for will ensure a happier relationship between you and your new airplane.

Aircraft Pricing Guides

Some may wonder how salespeople and insurance companies arrive at the value of an airplane. As most know, beauty is only skin deep, and the true value of an airplane is determined by sifting through a large number of variables.

Enter the Bluebook — the Aircraft Bluebook-Price Digest, to be more specific. With a distribution restricted to dealers, lending institutions, tax collectors, and anybody who has a need to know the value of an aircraft in order to conduct his or her business, the Bluebook has become the industry standard for aircraft valuation. For those who ever thought they wanted a subscription, the Bluebook's $245 subscription rate should turn curious individuals off. Similar to Bluebook is Vref, a new publication produced by the former editor of the Bluebook. Vref is quickly earning merit among those in the aircraft sales business. It, too, factors in all of the variables and even has pricing information on some homebuilts and warbirds. Many dealers use both books regularly, giving each a thumbs-up for their accuracy.

In five minutes, a dealer can come up with a figure that reflects the aircraft's total time, avionics equipment, condition of the paint and interior, plus factoring in that wheezy engine under the cowl. As any dealer will tell you, however, the books are just guides for finding a beginning figure.

For damage history, Vref provides a guide for determining the extent and age of the damage. Aircraft value takes a big hit in the first year after the damage was incurred and then gradually softens out as the repair begins to prove itself over the following years of service.

Both Vref and the Bluebook list figures that determine the average hours per year of certain model aircraft in order to determine what is "normal" use. For example, they might figure a Beech King Air (which is probably owned by a corporation) will fly 400 hours per year, while a Piper Super Cruiser (probably owned by an individual) will fly about 50. Vref's hour figures are very close to those in the Bluebook for many airplanes, but Vref lists average hours for every model year instead of a range of model years. After determining the average total time for an aircraft model, the reader can add or deduct a percentage of the cost (or a dollar figure for Vref users) relative to the total time of the particular aircraft in question.

Bluebook subscribers also receive a quarterly newsletter titled Marketline. It analyzes sales trends with graphical depictions of valuations in each class from singles to jets and helicopters. Vref subscribers receive a brief synopsis by the editor of recent trends.

After sifting through both books, we can say that both are excellent publications. A newcomer to aircraft pricing would find Vref easier to use because it requires less page flipping to locate total-time charts and time/value graphs. Almost everything is listed on the same page as the airplane in question. The Bluebook seems to have more information regarding ADs, modifications, and avionics, but it is a little more time-consuming to use, especially for first-time users. Helicopter pricing information is in the Bluebook but not in Vref.

The publishers of the Bluebook have a simple DOS-based computer program that allows its subscribers quick access to any type aircraft that is queried. Type in "1985 Cessna 206" and up comes the price. You then plug in total time, mods, and avionics and a figure will pinpoint that particular aircraft.

Aeroprice Software offers Windows-based pricing information to dealers and individuals. Aeroprice sells software in type-specific packages for $50 for singles and $70 for twins. The "professional edition," which includes a large selection of popular aircraft and monthly updates, lists for $350 a year. For more information call 800/307-0425.

Besides the books and software packages, fax services and 900-numbers have been established for those interested in obtaining price information. Fax-It-2U (800/838-1000) will provide a listing of popular twins currently on the market. Aircraft Data and Appraisals (900/454-4554) offers a service in which someone on the other end of the line looks through the Bluebook and Vref for the aircraft in question; a call costs $2.99 per minute and averages about 10 minutes in length. AOPA's Aviation Services Division can also aid members in determining the value of their aircraft by calling 800/USA-AOPA. — PAB

Understanding the Advertisements

1979 Turbo Arrow IV, 1500 TTSN, 200 STOH, NDH, 3-blade, fresh annual, new P&I, KX155s, DME890, TRT250, M1, always hangared, $70,000. Call 407/555-1234.

1979 Turbo Arrow IV — You know that you want a Turbo Arrow, but do you want a T-tail? All 1979 and later Turbo Arrows have a T-tail configuration, which contributes to a lack of pitch authority at low airspeeds. Soft-field and short-field operations are also hindered because the stabilator is above the prop wash and will provide no downforce to keep the nosewheel out of the muck. On the other hand, the T-tail airplane is less affected by configuration (gear retraction, flap extension) changes — and it looks neat.

1500 TT, 200 STOH — With a total time of 1,500 hours, this airplane has averaged 88 hours per year, a good figure that indicates it was neither a hangar queen nor an everyday commuter. The lack of a SMOH (since major overhaul) figure reveals that this may be the original engine, an engine model that rarely achieves TBO (the manufacturer's suggested time before overhaul). This owner elected to perform a top overhaul 200 hours ago in an effort to prolong the engine's life without the expense of a major overhaul. Expect to perform a major overhaul of the engine and turbocharger in about 500 hours or less. If you pursue this one, it would be a good idea to ask the owner what type of trips the airplane was used for. Longer-duration trips are far easier on an engine (especially a turbo) than are are shorter trips.

NDH — No damage history. Definitions of "damage" are mixed. A buyer might consider damage to be minor hangar rash resulting from careless line crews. A seller, on the other hand, might think of damage as a gear-up landing. Check the airplane's logbooks carefully to determine if any major damage was incurred.

3-blade — This aircraft has the optional three-blade propeller. Expect smoother (not necessarily quieter) operation with the three- blade prop, and a little more ground clearance than the standard two-blade version. Take any claimed performance gains over the two-blader with a grain of salt. Keep in mind that the cost to overhaul the new three-blader will be significantly higher than the two-blade prop overhaul.

Fresh Annual — Sometimes a loaded term to lure you into thinking you're in the clear maintenance-wise for the next year. Who did the annual? Was it a reputable shop that would have let no details slip by? Or was it an independent mechanic chosen by the seller who may have let something like a major AD or service bulletin wait until the next annual (yours)?

New P&I — New paint and interior. So you'll be getting a like-new airplane, right? Maybe. Check whether the paint and interior were done by a reputable shop. How was the aircraft stripped? Chemical stripper is the preferred method of most reputable paint shops. Are the stripes aligned evenly on both sides? Are there drips, sags, or runs in the paint? Is the interior fabric fireproof? Was everything logged? If the aircraft was "always hangared," as it says later in the ad, you should inquire about the reasons for the refurbishment. Was it just to change the color, or was the paint flaking off?

KX155s, DME890, TRT250, M1 — A real hodge-podge of equipment resides in this airplane's radio stack. The dual navcoms are Bendix/King KX155s, a nice set of radios that have established a good reputation. The DME 890 is a Narco unit of decent quality; however, when repairs are needed, the unit must be sent to the manufacturer or one of a few authorized shops, a major bane to owners of Narco equipment. The TRT250 is Terra's transponder, a compact little unit that may look odd next to the other full-size units. Check that the unit was returned to the factory to comply with a 1994 AD that cost each TRT250 owner some $300 plus downtime. The M1 is Northstar's faithful and simple loran box that has been around for a dozen years or so. Although a far cry from the capabilities of the newest GPSs, the M1 is still a valuable addition to any panel. Expect this avionics stack to leave some things to be desired — looks and functionality. With almost every major manufacturer of general aviation avionics displayed in this panel, expect some compatibility problems with the installation, too.

$70,000 — According to the Aircraft Bluebook-Price Digest, the aircraft is worth $63,768. Vref pins a tag of $69,846 on this airplane. One reason for the discrepancy is that Vref adds $10,000 for like-new paint and interior, something for which the Bluebook does not give an exact dollar figure. Both books overlook the engine's top overhaul and take huge deductions for the engine's time in service since a major overhaul (1,500 hours). The asking price of $70,000 isn't too far off if you consider the artificial inflation that owners put on their airplanes. It will probably sell for something in the range of the pricing guides' figures, provided the buyer can live with the avionics looks and the engine's forthcoming overhaul.

407/555-1234 — Your warning flags should rise after seeing this area code in the telephone number. The area code for central and east coastal Florida is 407. If the airplane has spent much time there, expect some extra airframe corrosion because of the humid sea air in Florida and other coastal regions. — PAB