Aircraft Appraisals: Can Airplanes Appreciate in Value Over Time?
There is no better time than right now to purchase your first aircraft. Cheap interest rates, combined with restrictive commercial travel, is generating more interest than ever in aircraft ownership. Owners of private airplanes have access to more than 5,000 airports throughout the United States. Commercial airlines are only able to use less than 500 U.S. airports, and that number is shrinking weekly. You may be forced to drive hours to an international airport as more airlines curt service to second and third-tier feeder airports.
That is why investing in your airplane is a good financial move for frequent travelers. An aircraft is bought right is a potential investment that can appreciate over time. Its also a business tool, and for many owners, it allows them the ability to reach destinations not possible in any other vehicle. Let's take a look at factors that can impact the value of an airplane.
What Affects Your Airplane's Appreciation?
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. You can buy an airplane with confidence that your investment will often appreciate, especially if you are looking at high demand, low supply aircraft commonly referred to as single-engine complex and trainers.
The value of most jets and turboprops decreases during an average ownership period. Unbeknownst to many, helicopters and utility aircraft like regional turboprops can and often increase in value over many years. The higher costs are often associated with the replacement of parts that have cycled out. In the helicopter world, an aging rotor-wing with all new components and recent maintenance will be worth more than one that is run out regardless of the age.
The increased potential value is more realistic if purchasing a recreational aircraft. That type of airplane is typically not affected by economic swings, and its value remains consistent even in downward trends. The value of private jets is impacted by the economy, and for many aircraft, once they reach 15-20 years of age, the depreciation curve is much slower.
Airframe Total Time
Every hour an aircraft accumulates affects its value. That per-hour reduction in value changes as the plane becomes older. This is a reasonably simple concept to grasp, but remember not all low time airplanes are "better," just lower time. Unlike cars and the 100,000-mile stigma, unless you are looking at an aircraft with a pickled engine, or in need of significant maintenance, total time is just one aspect of determining value.
This means that early in an airplane’s life, the number of hours flown has a more significant impact on an airplane's resale value.
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 or calendar expiration will affect the value of the plane.
The time for an engine to need an overhaul is established by the manufacturer. Most piston aircraft have to be rebuilt every 1,400 to 2,400 hours of flight time or every 12 years.
Most recreational pilots fly only 15 to 50 hours per year. This means, on average, a GA plane will be in use for more than 20 years before needing an engine overhaul.
With the cost to overhaul an engine around $25,000, the total time and manufacturer's recommended overhaul maintenance will have a considerable impact on airplane value.
Maintenance and Record-Keeping
Record keeping is critical to the value of an airplane. One of the essential factors in airplane value is making sure all scheduled maintenance is done on time and that all the logs are in order.
Make sure all documents and aircraft logbooks are complete and well kept. The records essential to maintaining an aircraft’s value include the aircraft's worthiness certificate and the FAA-approved aircraft flight manual.
Before buying an aircraft, you should also review the engine and airframe logbooks. Other vital records include the equipment list, weight, and balance data, and placards. An airplane with poorly maintained, out-of-order logbooks will raise concerns with any lender.
Damage to an aircraft decreases its value. When purchasing an airplane, carefully inspect both the plane and the logs. Evaluate what was damaged and who performed the repair. Have the aircraft appraised by VREF or Jason Zilberbrand, ASA, and Senior Accretoied Aircraft Appraiser with the ASA.
Interior Condition and Upgrades
An area that is easy for owners to overlook is the interior of the airplane. Seats, carpet, and the headliner should be regularly cleaned and any damage repaired. Minor things such as stains from spills, cracks in the leather, and cabinets that are cracked or in poor shape, can negatively impact the airplane value. A deep clean and detail can increase the value by making it more appealing to a buyer. A dirty plane is a poorly maintained one. Upgrading the interior before selling can increase the value. If you are selling your aircraft to a charter company, the addition of WiFi can increase the airplane value.
The value of equipment upgrades can have a significant impact on the resale value of an airplane. New avionics, airframe modifications, wingtips, HID lights, upgraded engines, props, floats can and will increase the value and also decease your potential buying population. Keep in mind, unless it's a popular modification, you will not get very much back from the resale.
Where You Store Your Airplane
When not being flown, keep your airplane stored in a hanger. Exterior paint condition is an essential factor in determining the value of your plane. Storing your aircraft in a hangar will reduce weather-related damage, such as corrosion.
When purchasing an airplane, be aware that while new paint can improve the appearance and increase the value of the aircraft, it can also be used to hide corrosion. Corrosion hurts the plane’s value.
Storage outside a hanger also affects the interior of the airplane. Leather seats near windows can become dried out, eventually cracking and splitting. A poorly maintained interior will negatively affect the value of the plane.
How an Airplane Value is 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 aircraft is worth.
Online Valuation Guide
VREF Online is a subscription-only program that provides the value of both historic and current aircraft. To obtain an online valuation report, simply input your aircraft serial number plus additional information data, and VREF will create a custom report.
You will receive both the retail and wholesale market value of your aircraft. This information can be used for insurance purposes or to value the aircraft for selling.
The Uniform Standards of Professional Appraisal Practice (USPAP) compliant appraisals follow two formats. A desktop appraisal does not include an actual physical inspection of the aircraft.
When an appraisal includes a full inspection, that consists of the aircraft and records. The person conducting the assessment will review the airplane's flight logs, maintenance records, and FAA records. The market value of the aircraft is based on all inspection materials, the age of the plane, the aircraft’s current condition, and any modifications that have been made and the most recent sales. Do not rely on any appraiser who does not have recent closing numbers, who is not USPAP compliant, or who is not insured.
Review Additional Information
Whether you are looking to purchase an airplane, need airplanes 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.