Purchasing an aircraft is a significant undertaking. Shoppers need to be well-informed to get the best deal.
Did you know that the price of a private jet ranges from $3 to $90 million? In addition, there are many other kinds of aircrafts that can be purchased at a cheaper price. Some are smaller planes, while others are used or refurbished.
One way to secure a fair price is by getting a price appraisal done. The sales comparison approach is one of 3 methods used to appraise an aircraft.
Read on to learn more about this appraisal technique. Explore this comprehensive guide to using the sales comparison approach before purchasing an aircraft.
What Are the Three Different Appraisal Techniques?
Before diving into the sales comparison method, it is important to briefly understand the other two approaches. The first method is referred to as the market approach.
Simply put, the market approach starts with the price of the aircraft’s base model. It then makes upward or downward price changes based on the aircraft’s features or condition.
The second approach is referred to as the income method. This method estimates the aircraft’s value by considering the amount of income it will generate.
This method is difficult to apply, especially if the aircraft is used for personal reasons. Most experts agree that the sales comparison approach is best.
What Is the Sales Comparison Approach?
This approach considers the actual sales price of similar aircraft. In some cases, the appraiser needs to make price adjustments based on various factors.
The appraiser may consider supply vs. demand for the aircraft. The aircraft’s value may increase, for example, if there are few units available for sale. This is also true if there is a lot of demand for the aircraft.
The sale price may require further adjustment if there are different features or characteristics. The intent is to add or subtract the value of differences to make an apples to apples comparison.
What Are the Shortfalls of this Approach?
The accuracy of the sales comparison method depends on a few different factors. For starters, you need access to a reliable source of sales data.
This sales database needs to be robust and have a lot of purchase history. It does not make for an accurate sales comparison if you are using 5-year old sales data.
Also, one or two sales points may not be adequate. Instead, appraisers like to have multiple sales to compare to. The more data points there are, the more accurate the sales comparison is.
Lastly, this method requires skill and experience in aircraft pricing and technical characteristics. It is not wise to leave price adjustments up to someone without aircraft knowledge. Therefore, you should ensure that the appraiser company is properly qualified and experienced to assess value.
Wrapping It Up
Purchasing an aircraft is likely one of the largest purchases of your life. With such a significant purchase, it is important to pay a fair and reasonable price.
The sales comparison appraisal method is an effective way to get the pricing right. If you are interested in learning more about the sales comparison approach, contact us for additional guidance.