Aircraft Values 101

I recently had a potential buyer look at an airplane I had for sale that came to realize that he had made an oversight. In the course of addressing the issue with me, the potential buyer insisted that the airplane was now worth "X" because "that was the number published in Vref." In his mind, anything other than this number was a too much.

Unfortunately this is not uncommon... valuing a used Bonanza or any aircraft for that matter, is a complex process. But often buyers fall into the trap of thinking that an airplane is worth "X" when its value is actually significantly higher simply because it is NOT an airplane that can be classified as "book." I wanted to take a couple of moments to talk about this in the hopes that I might ease the minds of potential aircraft buyers, and especially first time buyers when it comes to determining what constitutes a "fair and reasonable" value. For the purpose of discussion, I will use an older Bonanza with a book value of say $80,000.

First... understand that the Vref price data service that comes as part of your AOPA subscription is nothing more than a ROUGH GUIDE and that prices given in this guide are often inaccurate for a couple of reasons: A) they can be both unreasonably low or high depending on the model of aircraft you are evaluating and B) the actual value of the airplane can vary by more than 100% depending on its age, pedigree and equipment. 

Aircraft Bluebook allows for a Prime Condition Adjustment , or PCA, of up to 25% of the BASE value of the aircraft BEFORE engine times, equipment, avionics and modifications are even considered. There is a good reason for this. Paint, interior, and glass will easily cost an owner $32,000 not including logistics so is this not worth adjusting the value up an additional 25% of an aircraft valued at $80,000? Of course.

Second, unlike a used car, every airplane is unique and varies serial number to serial number. In evaluating a car, you have mileage, condition, local market conditions and there are literally thousands of units to compare. That is completely untrue in the aircraft industry because of the limited number of units and the huge number of variables that go into evaluating aircraft values... paint, interior, glass, TBO, avionics, damage history, condition, hangared, logs and records and the most difficult value number to pin down of all... the value of the maintenance the aircraft has received. 

Anyone who has ever owned and maintained a Bonanza will tell you that it is entirely possible to rack up a maintenance invoice well into 5 figures to correct issues on an airplane with less than desirable maintenance. In the case of an airplane whose "book" value is $50,000, the cost can easily approach 40% of the aircrafts value. Thus, you cannot compare the value of an aircraft maintained by Billy Bob's Aircraft Repair with the likes of a Finefield Aviation or Kalamazoo Aircraft to mention two of our noteworthy Bonanza shops here in the Midwest. I tell my clients that one can easily justify a 5-10% premium, depending on total value, for an aircraft with exceptional maintenance.

Third, book values are irrelevant to the buyer that requires certain "must have" equipment onboard. Case in point... tip tanks are valued at $1900 to $2200 depending but will cost $12,000 installed. If your mission requires tip tanks, would you use book value when comparing one aircraft without tip tanks to another aircraft with the tanks? Of course not. Certain equipment will, and should ALWAYS be worth more IF it falls on your "must have" list.

I once had a client that had a sign on his office door stating, "One more 'good deal' and we are Out of Business!" When it comes to purchasing a used airplane, don't ever be afraid of paying more upfront for something truly exceptional. I assure you that your decision will pay both immediate and extended dividends over the life of your investment.