What happens when emotions confront reality
In the March 1989 issue of AOPA Pilot we ran a package of feature articles under the rubric "Sweet Smell of New." The thread that ran through each article was that buying a new airplane could, in fact, make sense for some pilots. As a creature of the times, however, the package also did a little whistling past the graveyard.
Seven years ago, general aviation manufacturers were at an economic and spiritual nadir. Product liability reform had yet to be enacted, and manufacturers groaned under the burden of all manner of lawsuits. A sort of vicious downward cycle ensued. To pay for liability costs, manufacturers raised prices. Pilots got sticker shock and stayed away from new airplanes in droves. Then came reduced margins that forced manufacturers to lay off employees and curtail production. Piper threw in the towel and declared bankruptcy, though this was largely a consequence of lousy management under former head M. Stuart Millar. Millar pitched himself as a ray of hope in a depressed market, and the media (AOPA Pilot included) fell all over itself in an orgy of shameless praise. But while Millar fiddled, Piper burned.
That was then. Now the business climate appears to have turned around. The General Aviation Revitalization Act of 1994 provided a much-needed boost to the industry's mood. It remains to be seen whether it will really alleviate the more aggressive product liability actions. Interest rates have come down, providing incentives to reinvest capital and create more favorable terms for consumer financing. We may never see a return of the generous tax incentives that spurred on the go-go 1970s, but at least there's some good news.
Does this mean that prices for new airplanes have come down? No way. They're as high as ever. But product liability reform, in some part, has let manufacturers offer more features, better technology, and higher value to buyers of new airplanes. As in 1989, buying new can still make a great deal of sense.
The New Piper's director of marketing and sales, Larry Bardon, admits that new airplanes aren't for everyone. "Our customers are typically high-net-worth individuals who demand the best of any product. They want to buy new for the emotional appeal. They're knowledgeable of our pricing structure and come in the door without any sticker shock. They might have had the sticker shock a few days before, but by the time they get here they're over it," he said.
"Buying new has economic and technological advantages, too." Bardon said. "Our 1996 Malibu, for example, has an engine monitoring system that records redline exceedances and other trend-monitoring information. There's also more equipment provided in standard airplanes, like intercoms and more powerful alternators. Better panels and avionics, too."
Bardon also points out that new airplanes have higher residual values. When the time comes to sell, owners may be surprised to see how little their airplanes' market values have fallen. When he used to be sales director for the Pilatus PC-XII, Bardon often sold customers on the idea that their new airplanes would be worth as much — or more — on the used market as their original purchase prices. "I used to tell them they could fly for free, because the PC- XII actually appreciated over time," he said.
This kind of appreciation is, in large part, because of inflation creep. Prices go up with each new model year and this helps boost the value of good, used late-model airplanes. It's through this mechanism that some feel Cessna's new single-engine production will put spikes in the market value of earlier Cessna singles. With six-digit new models as the cream of the crop, competition for "like new" used models drives their prices upwards.
Leasing, an ownership alternative that promises to become as common with new airplanes as it is in the automobile industry, may also account for more and more new transactions. Cessna has said that leasing plans will be available for its new piston singles, and Piper recently announced its own leasing plan.
Under this scheme, lessees can face lower up-front costs and lower monthly payments. The lure of flying off with a new airplane for little more than a security deposit and a couple of monthly payments in advance will certainly appeal to many prospects. The catch: You have to return the airplane at the end of the lease period — or buy it at a pre-arranged price and face a whole new round of payments.
Mooney Chief Operating Officer Jeff Dunbar says that new airplanes offer a combination of tangible and intangible benefits that simply can't be found with used airplanes. "On the tangible side are the warranties, the capabilities of the new models Mooney offers, and the FlightSafety training that comes with each new Mooney. On the intangible side is the peace of mind that comes from knowing that the airplane has an unblemished history.
"With a used airplane, we like to say that there are good ones and bad ones. But a new airplane is always good," he said.
Dunbar does have a point. New airplanes aren't simply new. They're also the end result of years' worth of product improvements. Just as important is that new airplanes — hopefully — incorporate any changes mandated by past airworthiness directives and many service bulletins in the history of the product line.
Apart from the modern equipment, improvements, and better terms (five to 10 percent down and 15 to 20 years' worth of payments is now possible, whereas 10 years ago the unbending rule was 20 percent down and seven years), new airplanes also come with impressive warranties. For new Pipers, it's two years or the first 1,500 hours for spinner-to-tailcone coverage. Mooney provides two-year, 600-hour warranties for the Ovation and TLS, and one year for the MSE. Separate warranties offered by avionics and engine manufacturers typically also are set at two years.
This is all very nice, but let's face reality. Most pilots don't have the wherewithal to take on a $100,000-plus (make that $300,000- to $700,000-plus for high-end piston-powered airplanes) price tag. Regardless of Bardon's feelings on the matter, sticker shock is a reality. Dunbar says that "pilots look to their mission and their budget" for initial guidance in planning an aircraft purchase. Maybe that's why sales of used aircraft came to some 27,000 general aviation airplanes last year, according to FAA statistics. New airplanes accounted for about 3,000 transactions — and that includes large airliners, commuter aircraft, and helicopters. Of those 3,000, only 900 or so involved small (under 12,500 pounds maximum gross weight) piston-powered aircraft and turbine- powered business jets.
Buying in? The people's choice goes to used airplanes, no doubt about it. They can provide good utility, quality, and performance at a fraction of a new airplane's price. A new airplane's advanced avionics are impressive, but most can be plugged into an older airplane and produce the same results. With few exceptions, the performance of comparably powered and configured new and used airplanes is virtually identical. Cosmetics aside, a new airplane and its well-equipped older sibling might as well be identical — as long as the used airplane has an untarnished damage history, a superb maintenance record, and an unclouded title, that is. These and other related issues are dealt with in detail elsewhere in this issue.
For the well-heeled, the choice of new or used may well get down to such emotional factors as, well, the smell of new. Some pilots, like some car aficionados, are simply drawn to the unique aroma that exudes from a new interior. These people, says Mooney's Dunbar, "just like coming to the factory and being the first ones to take the plastic coverings off the seats."
Used: 1972 V35B Bonanza
For about $90,000 you can buy what many believe to be the classiest piston single ever built. The V-tail Bonanza, manufactured from 1947 to 1982, came in both normally aspirated and turbocharged varieties. Cruise speed for this model is listed as 172 knots. One disadvantage is the non-standard location of the landing gear and flap switches, which can trick the unwary into gear-up landings. A spate of inflight airframe failures was linked to structural shortcomings in the tail structure, but a mandatory beef-up fixed the problem.
New: 1996 Beech B36TC Bonanza
At a cruising altitude of 25,000 feet, the B36TC can motor along at 200 knots. But, with an asking price of some $450,000 for an average-equipped model, this 300-hp, turbocharged variant of the modern Bonanza line is about as pricey as non-pressurized piston singles come. Even so, they still attract a small but dedicated following. If you can live without turbocharging, Beech still offers the A-36 Bonanza for $50,000 less than the TC.
New: 1996 Mooney M20R Ovation
Fuel-efficient and fast (186 knots on 15 gph), this newest Mooney goes for an average price of $250,000 or so. However, add a known- icing package and fill the panel and prices could soar well beyond the $300,000 mark. The Ovation rounds out the new Mooney line — with a price and performance below the fire-breathing, turbocharged TLS but higher than the "economy" MSE. All the new Mooneys offer excellent performance with a host of modern redundancies and creature comforts.
Used: 1966 Mooney M20E Super 21
Mooneys of this vintage established a more modern identity for this marque — and its reputation for value. Signature features include a manual gear extension and retraction system and a clever wing- leveller, dubbed "PC" (for positive control). Super 21s and their cousins, called Executives, have 200-hp engines and turn in maximum cruise speeds in the 150- to 160-knot range. At $39,000 for a nice, clean 1966 model, it's one of the best buys around.
New: 1996 Piper Archer III
The New Piper Aircraft Corporation can fix you up with a brand-new, 180-hp, 129-knot Archer III for a base price of $149,600. A recent cleanup of the instrument panel leaves the new Archer with a clean, professional cockpit with clearer instrumentation. Ignition and other electrical switches were relocated to an overhead panel. An improved cowling design makes for less drag, better engine cooling, and sleeker looks. Interiors are the plushest ever for the Archer line, and an optional air conditioning system will keep you and your riders cool on the hottest of days. If you're looking for an easy-to-fly, four-place cruiser for VFR and light IFR flying , the 1996 Archer III may be for you.
Used: 1976 Piper Archer II
For $48,500 or so, you can buy the Archer III's predecessor. The 1976 model is popular in the used market because it's the first year that Piper changed from the old Hershey-bar-style wing planform to the current, higher aspect ratio, double-taper design. The gross weight and useful load were also upped by 100 pounds during the same model year. It has been called plain Jane, but it has also been called sturdy and dependable. A used Archer II goes about as fast as a new Archer III, has virtually the same engine, looks almost the same, and is comfortable to fly. You could upgrade the panel, paint, and interior for tens of thousands less than a new Archer, but still not have the residual resale value of the Archer III.
