Aircraft Appraisals 101: What impacts the value of your aircraft?
Are you interested to learn what drives the value of your aircraft? In this Aircraft Appraisal 101 article, I am going to show you the major factors that impact value and some easy things you can do to assist your appraiser with the process.
What Affects Your Airplane's Value?
It doesn’t matter whether you are purchasing an aircraft for business or are a pilot in search of a small plane for personal reasons. Chances are if you are taking out a bank loan, you will also need to get an appraisal.
So what are the major factors in determining value?
Total Time and Airframe Condition
A total airframe time is equivalent to an odometer. As an aircraft operates, the hours accumulate, and just like the odometer, the accrual never starts over. The airframe total time is often used by buyers to determine if the plane has been well cared for.
Total time is essential to the appraiser because it provides guidelines based on how many hours there are in total of what should have occurred in terms of maintenance. The stigma of a high time aircraft is very real, and in some cases, buyers will avoid a high time plane at all costs. This is more often seen in the turbine classes, as a business jet with a high total time could be instore for major maintenance or just been operated well beyond industry averages.
Is the total time the true indicator of a creme puff? No! In some cases, an aircraft operated on a regular schedule will be more dependable and have a higher dispatch reliability rating. So while this is one of the drivers to value, it can not be isolated as the sole determinating factor.
Engine Time Since Overhaul
The number of hours on an engine affects its value. Each engine has a lifespan, so how close it is to its recommended overhaul date will affect the value of the plane. Since all engines have a calendar hard time and a TBO, the appraiser will utilize that data to determine how much life is left in the engine. The appraiser is looking to see if the engine was overhauled by a reputable shop, or if a top overhaul or field overhaul was done. Each of these items has an associated impact on the overall value. Simply stated, someone who has a factory remanufactured engine on an average total airframe time aircraft will have a higher overall value than someone who does top overhauls on a low time aircraft. Please note, this is not a statement of performance or airworthiness.
The time for an engine to need an overhaul is established by the manufacturer. Most piston engines have to be overhauled every 1,400 to 2,400 hours of flight time, or 12 years. Turbine engines can have mid-life, overhauls, major periodic inspections, core zone inspections, as well as being operated on-condition. Modern turbine engines can have TBO's of 10,000 hours.
Maintenance and Record-Keeping
Record keeping is critical to the value of an airplane. One of the most important factors of the value of an airplane is making sure all scheduled maintenance is done on time and accounted for in the logs.
Airworthiness Directives, Service bulletins, and the maintenance facility itself all go into the pedigree of the aircraft.
Make sure all documents and aircraft logbooks are complete and well kept. The records are essential to maintaining an aircraft’s value and should include the aircraft's airworthiness certificate as well as a copy of everything ever installed or removed from the plane.
Before buying an aircraft, you should also review the engine, prop, and airframe logbooks.
There is no single, worst-case scenario then missing logbooks. Most banks will walk away from the loan, and it is costly to recreate missing logs and records. So if you want to protect the value of your plane, get organized. Better yet, get them in digital format now and make your lender, insurance agent, and maintenance facility extremely happy. Plus, you'll never run the risk of having them damaged or destroyed. VREF Vault is the solution for your aircraft logbook storage, so be sure to check it out.
Damage assessment is complicated and never quick or easy. If the aircraft you are looking to buy has been damaged, make sure you understand when it occurred and who did the repair. How many owners has the airplane been through in that period?
If you suspect the aircraft you are buying had damage, then make sure you read the logbook entries and understand if this was damage from a static or in-motion event. In-motion events are more serious, and you should seek out the advice from a VREF appraiser to assist in helping you understand the loss of value.
Interior Condition and Avionics Upgrades
An area that is easy for owners to overlook is the interior of the airplane. Seats, carpet, and the galley should be regularly cleaned and any damage repaired. Minor things such as stains from spills, cracks in the leather, and cabinets that need some TLC, can negatively impact the airplane value. It amazes me how many people list a dirty plane, and if I see dirty photos, it makes me wonder what else dirty is? If I see a dirty aircraft, I know I am going to be looking harder to see what's really going on with the condition.
Avionics are always evolving, and in some cases, mandated. Modern avionics can certainly attract more buyers, but make sure you understand that like consumer electronics, avionics will depreciate. Generally speaking, it is not a good return on your investment to install new avionics for the sole purpose of resale. Avionics upgrades are a significant driver of the overall value to the aircraft, so ask VREF if you are unsure what your panel is genuinely worth.
The value of equipment upgrades can have a significant impact on the resale value of an airplane. Modifications to the engine or airframe are common and can increase the amount quickly.
How Airplane Values are Determined
You are either looking to purchase an airplane or have one to sell. The question is, how do you know the airplane's value? Here are two ways to determine what an airplane is worth.
VREF Online Software
VREF Online is a subscription-only software program that provides the value of over 550 aircraft models.
VREF Online offers subscribers access to a complete database of aircraft, including all piston fixed-wing, all turbine, and turboprop fixed-wing, turbine and piston helicopters, commercial narrow-body fixed-wing. Everyone involved with aircraft transactions should subscribe to VREF Online.
VREF Appraisal Services provides comprehensive valuations to determine an aircraft’s Current Market Value and Forecasted Residual Value, giving our clients accurate figures and projections. We offer Appraisal products for all aircraft including; Business Jets, Turbine/Piston Helicopters, Commercial Jets, Regional / Commuter, and Piston aircraft. We also specialize in Engines, Spares, Inventories, Support Equipment, Fixed Base Operations, and Antique or Museum aircraft and artifacts.
Review Additional Information
Whether you are looking to purchase an airplane, need an aircraft valued for insurance purposes, or are thinking about placing your aircraft for sale, VREF can help you get the information you need. Shop our online store for copies of the VREF Verified Report, copies of the VREF Valuation Guide, VREF Residual Value Report, and more.