March 2016 Issue
Certified PreOwned Aircraft: Price-Setting Revisited
A sales dealer offers an inside look at the unique process of setting the price of a preowned aircraft.
The January 2016 issue of Aviation Consumer included an excellent overview on the merits of manufacturer-sponsored certified preowned (CPO) aircraft sales programs. While this growing market trend is attracting a great deal of buyer interest (especially for Mooney models), there is still some confusion on how resale pricing is determined, how much more buyers will pay for these top-of-the-food-chain machines and whether that increment is really worth it.
In this short follow-up, I’ll offer an insider’s perspective on how we—a CPO Mooney dealer—determine what you’ll really pay and why there might be sizable discrepancies with pricing publications.
Bridging the Price Gap
It’s important for manufacturers and dealers to understand and support the used market because it affects the credibility of the brand. In Mooney Aircraft’s case, if an individual wants to purchase an aircraft, but can’t justify (or can’t afford) a brand-new one, a range of pre-owned choices still keep buyers in the Mooney family.
In the used market, you will see a huge disparity in equipment, hours of operation, maintenance and damage history, cosmetics and a host of other factors which affect the price of an aircraft. Simply put, a certified preowned program ensures that discriminating buyers have access to aircraft that have had superb care and are in superior condition, but there is a narrow supply chain.
Consider that in late January, there were about 154 Mooney Acclaims, Ovations and other models on the market, but just four that meet the stringent criteria required of a CPO aircraft.
As an example, let’s revisit the numbers on the late-model Mooney Acclaim, N189FA, which appeared in the previous article. This 2008 Acclaim Type S qualifies for the Mooney CPO program and is on the market for $499,000, but Aircraft Bluebook suggests an average retail price of $365,000. Why the attention-getting price gap? The bulk of it is attributed to routine adjustment, not CPO status.
First, Aircraft BlueBook represents an average retail price of preowned aircraft. Average airframe hours are used to compute base average and half-time engine hours is assumed. So, if a plane has more or fewer airframe or engine hours, the value needs to be adjusted.
Additionally, the price guide doesn’t take into account much of the equipment installed in the aircraft—a factor which greatly affects the price. The chart below shows the Aircraft Bluebook average value and the appraisal adjustments made to the Mooney Acclaim.
Notice that Aircraft Bluebook allows the appraiser to add between 5 to 25 percent for what’s known as a “prime condition adjustment,” which is normally about 10 percent above Bluebook. While the size of that adjustment varies from airplane to airplane due to dozens of factors unique to each aircraft, this aircraft is arguably the top prime condition aircraft on the market today and offers the advantages of the Mooney CPO, which no other Acclaim on the market at this time does. That CPO status results in a $21,660 price premium.
The CPO value-added factors, which represent the price increment above, includes 27 points of inspection, repair and refurbishment of the engine, avionics, airframe, interior and exterior. Additionally, the aircraft is in close-to-new cosmetic condition, it has no damage history, it has always been hangared, has complete logs, a fresh annual inspection and all maintenance done at a Mooney Service Center. Many of these factors aren’t found in the Bluebook.
Other items which add value to this Acclaim example include the following equipment: Garmin GFC-700 autopilot, WX500 Stormscope, Skywatch active traffic system and a 406 MHz ELT.
Bottom line: You’ll pay a premium for CPO aircraft because they are in superior condition, which some buyers want, and many do not need. A reputable dealer will walk you through an appraisal in detail, explaining the unique factors that drive the asking price of an airplane.
|2008 MOONEY ACCLAIM TYPE S (CPO premium $21,660)|
|Aircraft Bluebook Average
Retail and Adjustments
|*$365,000||*Aircraft Bluebook published average price|
|$15,400||Low airframe hours (add 4.3% for low usage)|
|$2,900||Low time engine|
|$20,000||Air conditioning retrofit|
|$20,000||Type S model (not shown in Aircraft Bluebook)|
|$10,000||G1000 SVT synthetic vision (not shown in Aircraft Bluebook)|
|$30,000||WAAS upgrade (not standard until model year 2009)|
|$2,000||Jeppesen electronic charts|
|$12,000||310-HP engine modification (not shown in Aircraft Bluebook)|
|$36,500||Prime condition price adjustment|
|$513,840||Predicted retail price|
|*$499,000||*Dealer asking price|
Fred Ahles is the president of Premier Aircraft Sales in Fort Lauderdale, Florida.