How To Buy A Project Plane And Not Lose Your Lunch see more
NAFA member, Jason Zilberbrand, President & CTO of VREF Aircraft Value Reference & Appraisal Services, shares what to look for when buying a project plane.
Looking to buy a project plane? It seems easy enough, but is it something you should consider?
If there is one thing a hot market will create is a lack of inventory. The fewer the aircraft available to the buying public, the more appealing project aircraft become. There are varying degrees of what some call a project aircraft, from the easy stuff like cosmetic updates to total restoration that can take years to complete.
Keep in mind that there are no easy wins when it comes to project planes. It’s a commitment. Continue for more information and insider tips on buying a project plane without losing your lunch.
This article was originally published by VREF on June 11, 2021.
Top Single-Engine Piston Aircraft & Valuation Locations To Keep An Eye On In 2021 see more
NAFA member, Jason Zilberbrand, President and CTO of VREF Aircraft Value Reference & Appraisal Services, shares the latest information you need to know regarding locations for valuations and top single-engine piston aircraft.
Following the outbreak of COVID-19, commercial air travel fell drastically. Currently, the United States is rounding a corner of the pandemic, and more people are free to fly around the country with little restriction.
However, with the temporary measures that restricted air travel in 2020, private air travel increased. Despite the lowering of commercial restrictions, more and more people have gotten a taste of flying private and don’t plan on stopping any time soon.
Read on to learn more about the top single-engine piston aircraft and the best locations for valuations in 2021, whether your search is international or domestic.
This article was originally published by VREF on June 14, 2021.
NAFA member JSSI Advisory Services shares what you need to know about aircraft appraisals. see more
NAFA member JSSI Advisory Services shares what you need to know about aircraft appraisals.
What is an aircraft appraisal?
Appraisals are used across the board to determine the value of assets. You may have encountered an appraisal while securing your home mortgage, for example, and they are also used to determine the worth of your business aircraft. The American Society of Appraisers (ASA), the governing body for appraisal accreditation, defines the process as “an unbiased, third-party opinion of value.”
When you own and operate an aircraft, you may need to keep a finger on the pulse of your asset’s current value for tax and depreciation purposes, but it’s also important to be informed if you wish to refinance or sell your jet, turboprop or helicopter. Aircraft appraisals are often a required condition from many lenders and lessors prior to entering a financial transaction.
This article was originally published by JSSI Advisory Services on July 19, 2021.
Jason Zilberbrand, VREF, discusses the aviation supply chain's impact on the aviation industry. see more
NAFA member, Jason Zilberbrand, President and CTO of VREF, discusses the aviation supply chain and it's impact on the aviation industry.
If you’re having trouble purchasing an aircraft or getting your aircraft in for regular maintenance, know you’re not alone. There are several factors that are affecting the aviation industry at the moment. However, there is a large emphasis on aviation supply chain challenges causing some trouble for aircraft owners everywhere.
In other words, if you haven’t stocked up on parts for your aircraft now, you could be waiting for a while to get the maintenance you need. Unfortunately, there is no flawless solution to this problem. But you can take some steps to help your future self.
Read on for some of the most disruptive supply chain challenges. Also, see what you can do to avoid potential problems.
This article was originally published by VREF on July 7, 2021.
Adam Meredith, President of AOPA Aviation Finance Company, answers your aviation finance questions. see more
NAFA member Adam Meredith, President of AOPA Aviation Finance Company, answers your aviation finance questions.
Question: I'm in the process of buying my first airplane. I'm planning to pay for it without financing. Do I need title insurance? If so, where can I get it?
Answer: While title insurance may not be necessary, it does help with peace of mind. Especially when purchasing an older aircraft that may have gone through several ownership changes. Title insurance will protect you in the event a prior registration or bill of sale was filed incorrectly. AIC can assist in acquiring title insurance if you wish to purchase it. At the very least a thorough title search should be conducted prior to purchase through one of the aircraft title an escrow companies in Oklahoma City. AOPA members receive a discount through our strategic partner, Aero-Space Reports, for using their title and escrow services. Please feel free to reach back out to us if any other questions should arise during your purchase, we’d be happy to help.
Question: I have an Experimental GlaStar that I built and have flown for 20 years, can I get an appraisal on that from AOPA? Let me know what information on the plane you need if you can do it.
Answer: AOPA does not offer in house appraisal services. We utilize tools such as VREF and Aircraft Blue Book to determine value. Experimental aircraft, however, do not have book values. VREF offers certified desktop appraisal services but an appraisal can be obtained from any appraiser licensed with the Professional Aircraft Appraisal Organization (https://appraiseaplane.org/) or American Society of Appraisers (https://www.appraisers.org/Home).
This article was originally published by AOPA Aviation Finance Company on July 6, 2021.
NAFA member, VREF, shares 6 major red flags to avoid when buying an aircraft. see more
NAFA member Jason Zilberbrand, President & CTO of VREF Aircraft Value Reference shares what to watch out for when buying an aircraft.
When it comes to selling an aircraft, most people are above board, fully transparent, and open about the condition and pedigree of the plane. But with a super hot market, many owners with problematic aircraft find the perfect environment to get rid of the "lemon." So what can you do to protect yourself when no one else will? What do unscrupulous sellers do to lure you into a purchase? Keep reading to find out.
Anyone that has been actively looking for an aircraft in a market like the one we have today can all share similar stories of frustration, false starts, lack of communication, ghost listings, and my all-time favorite, the unicorn. After spending three decades buying and selling aircraft, I can share more horror stories than you would believe. So here are some tips and tricks to keep you one step ahead of the scammers.
This article was originally published by VREF on April 29, 2021.
NAFA member, Jason Zilberbrand, VREF, discusses aircraft corrosion and how to prevent it. see more
NAFA member, Jason Zilberbrand, President and CTO of VREF Aircraft Value Reference and Appraisal Services, discusses aircraft corrosion and how to find and prevent it.
Let’s talk about one of the most significant aspects that can depreciate an aircraft immensely. We call it aircraft corrosion, and it can stop a potential buyer from ever closing a deal.
Any corrosion on a plane is severe and can cause an aircraft to fail during flight. Various levels of decay have caused fatal and non-fatal crashes, including an England Airbus A330 in 2013, a Georgia ASA Embraer in 1995, and a Netherlands Boeing 747 in 1992 that claimed 43 lives. We see more corrosion now than ever before, and impacted airframes run the gamut from single-engine piston through commercial aircraft.
The thing about aircraft corrosion is when an aircraft owner is told they have it, they sometimes find it hard to believe. But any pilot, mechanic, or aircraft owner with experience can tell when an aircraft is compromised because of corrosion.
How do you keep an eye out for aircraft corrosion, treat it, and prevent it from happening in the future? Keep on reading.
This article was originally published by VREF Aircraft Value Reference and Appraisal Services on April 28, 2021.
Is It Possible To Make A Profit On Private Jet Ownership? see more
NAFA member Jason Zilberbrand, President & CTO of VREF Aircraft Value Reference & Appraisal Services, discusses the possibility of making a profit on private jet ownership.
Most first-time buyers and potential aircraft owners want to know whether money can be made by buying a private jet. After all, who wouldn't want to fly for free and flip that plane for a profit? So, is it possible to make a profit by buying a private jet?
No, for the most part, you can not make money on a private jet purchase. Just as it is with many specialized asset classes, it takes many years to understand the complexity of buying and selling aircraft to the point where you would not be risking your money. It reminds me of the time I went to buy my first diamond ring. After peppering the diamond broker with questions, I was confident I knew enough to buy a diamond for an investment, hold it long enough and flip it while realizing a healthy gain. Well, that, unfortunately, is not the norm. Unless you are a diamond broker, there is simply no way you will be able to buy a diamond at inventory prices without having substantial experience, resources, or luck.
And if your goal is to turn a profit on an aircraft, we do not recommend buying a private jet.
Let’s dive into the many factors that greatly impact an aircraft's profitability and some strategies to cover some of the costs associated with owning an aircraft.
3 External Factors That Can Affect Your Aircraft Profits
First, it’s critical to understand the relationship between an aircraft owner and the aircraft. A common misconception is that an aircraft is the same as a beautifully restored and well-maintained car. While both can be significant purchases, they are extremely different in what happens after you sign the dotted line to buy it.
The main difference between other assets and a private jet comes down to maintenance costs and the complex market for pre-owned aircraft. While you can refurbish a car, maintain, and store it within a fairly reasonable budget, you cannot do the same with an aircraft.
Maintenance Can Come As A Surprise
Once again, owning an aircraft is not like owning a car. Potential buyers are often surprised to learn that owning an aircraft is not as simple as placing gas in the tank and traveling worldwide at the drop of a hat.
An aircraft in the most “perfect condition” will require storage fees, maintenance, gas, and the proper amount of utilization. Even an aircraft that has been a hangar queen is an issue because of its low airframe total time.
The problem with buying an aircraft with a low total time is that if an aircraft sits around, which is tantamount to neglect, it requires even more maintenance than if the same aircraft had been flown at a normal amount of annual utilization. Your chances of making a significant return on an aircraft that has been sitting for extended periods of time are slim to none. Of course, if you are an A&P, have a warehouse or hangar full of parts, and can do the wrenching yourself, then ignore the above, but chances of that being the case are also slim to none. Please take my advice, stick to what you know! If the aircraft is a jet, you won't be turning any wrenches, but you may have some valuable resources; for example, you may have the cheapest guy in town to do your scheduled maintenance, but remember you are not in control of your financial destiny if you cant do it yourself.
It’s expensive to fly, but it’s also expensive not to fly. There’s no win-win situation when it comes to aircraft maintenance with a plane that has been sitting.
Depreciation Of An Aircraft
As we’ve mentioned in some of our previous blogs, private aircraft purchases are booming since the pandemic, while commercial air travel has taken a hit. While this demand is great for sellers, new buyers should be aware of an aircraft's depreciation rate before making a purchase.
There are a few factors to consider when thinking about the depreciation of an aircraft, such as:
Aircraft make and model
Size of the fleet
age of the fleet
A Few Ways To Cover Some Of Your Aircraft Costs
If you’re interested in how you can cover some of the costs of owning a private jet, here are some options you should consider.
Charter Your Aircraft Using A Management Company
Yes, you can charter your private jet through a company that can manage the aircraft for you when you are not using it. However, there are a few things you should know regarding the use of a management company.
For starters, you as the owner will still be responsible for paying any maintenance costs, inspection fees, extra improvements, and overall aircraft upkeep. You may also have to pay the management company a recurring payment to handle chartering your aircraft.
Then, the management company may take a percentage of earnings from chartering your aircraft out – reducing your profits. While it is better than nothing at all, it is something to consider.
Finally, your freedom to use your aircraft when you want to might be limited. You may need to discuss your own ability to use the aircraft in great detail with the management company. To make a profit of any kind, your aircraft will need to be available for others to use. This may mean requesting to use your own aircraft depending on availability during popular travel times, such as holidays or weekends.
Lease Your Aircraft
You can set up contracts to lease out your aircraft to a business or even a flight school. You may need help setting this up just right so that the rules and other terms are clearly defined. However, this arrangement may work best for you if you don’t use your aircraft very much. If this is of interest, you need to speak with an aviation attorney and your CPA. There are no redo's if you do not set up the aircraft's ownership properly, and you may have just kissed your depreciation goodbye if not done correctly.
Remember, you may need to play an active role in managing your aircraft if you plan on leasing it out on your own without a management company’s help. Again, you will be in charge of any fees, maintenance, inspections, and additional costs associated with the upkeep of your aircraft. This means that you will need to be extremely hands-on and aware of your aircraft’s utilization and what is required to be reliable to travel year-round.
Spend Wisely And Shift Your Perspective
To summarize, it is best to buy a plane because you need to use it – not to purchase it as an investment. Between the numerous costs associated with maintaining and supplying an aircraft and managing the aircraft yourself, it may be difficult to make money by owning one. The best way to utilize a private jet is by renting one – unless you are fully prepared to take on ownership responsibilities. While you won't make money by investing in an aircraft, you will make more money by using the aircraft as an efficient means of travel. Owning an aircraft is about managing your time, which is the most valuable asset you own. If you want more time, a business aircraft allows that to happen. So while there is no direct profitability, ask the business person using an aircraft how much it was worth when getting home in time to celebrate a birthday or holiday.
What You Need To Do Before Buying A Private Jet
Don’t go in uninformed when deciding to purchase an aircraft. For 27 years, VREF has produced trusted aviation appraisals and valuations produced by Accredited Senior Appraisers who know the industry from the inside out. With thousands of appraisals under our belt, there truly is no better place to turn to when you need all of the information of an aircraft done thoughtfully and without bias. Explore our services here.
This article was originally published by VREF on April 5, 2021.
Past Maintenance Predicts Future Value see more
NAFA member Anthony Kioussis, President & CEO of Asset Insight, discusses how aircraft maintenance effects your aircraft's value with Gil Wolin, Business Aviation Advisor Publisher, in this Business Aviation Advisor Above & Beyond Podcast.
It’s so tempting. The inventory of preowned turbine aircraft for sale was down near 7.2% in late March, according to JETNET. This might be a great time to sell or trade your current aircraft, as market values appear to be near all-time highs.
Market value depends not only on total hours flown, but also on your aircraft’s maintenance record: how close it is to major inspections, overhauls, updates, or refurbs.
In Past Maintenance Predicts Future Value, Asset Insight’s Tony Kioussis discusses how to calculate the impact of your aircraft’s current maintenance condition on its current and future market value – and how to use those data to manage your investment maintenance.
When there’s more to be said than space and copy deadlines allow, you can rely on the Business Aviation Advisor “Above and Beyond” podcast series to get you the information you need, enabling you to make the most of your aviation investments.
This podcast was originally published by Business Aviation Advisor on April 4, 2021.
Amstat Aircraft Values & Resale Market Quarterly Report Webinar 2021: "Navigating the New Normal" see more
Watch the latest business aircraft resale market quarterly update from NAFA member, AMSTAT, General Aviation Services and Bloomberg Intelligence.
Content includes insights into:
- Business aircraft segment value trends.
- Resale transaction activity, resale inventory analysis and charter and fractional aircraft utilization.
- Economic analysis with context for business aviation.
Click here and enter your details to view the video and to access a PDF of the slides. We'll also reach out when the next update webinar is going to take place.
This video was originally published by AMSTAT on May 20, 2021.
Insider Tips To Get The Most Accurate Aircraft Valuation see more
NAFA member, Jason Zilberbrand, President and CTO of VREF Aircraft Value Reference, shares insider tips to get the most accurate aircraft valuation.
No online likes surprises – especially expensive ones.
As a potential aircraft owner, you want to make the most informed decision when purchasing an aircraft.
If you are a current aircraft owner, then you might be looking to organize your assets for estate planning.
No matter which side you stand, the one thing both of these groups have in common is the eventual need for a trustworthy and accurate aircraft valuation.
10 Insider Tips to Get The Most Accurate Aircraft Valuation
While evaluating an aircraft seems like a fairly simple concept, there are some common mistakes that can be made throughout the process. When it comes to such a big investment, you don’t want to be swindled. Here are 10 insider tips you should know before you settle for just any aircraft valuation service company.
1.Conforms To Set Appraisal Standards
Part of finding a reliable evaluation for an asset, such as an aircraft, is locating an experienced professional. When browsing appraisers and valuation experts, you should check to see if they are part of the Uniform Standards of Professional Appraisal Practice (USPAP).
What is USPAP?
USPAP is the nation’s foremost authority on the valuation profession.
A need was seen for a set base of standards for professional appraisers. So several professional appraiser organizations combined and created a committee to help regulate and set congressionally authorized standards. Since 1987, USPAP has served as the widely accepted group of appraisal standards in the United States.
2. Experience And Expertise
You could find a variety of appraisers available in a Google search. But you want one who knows and is familiar with the aviation industry inside and out.
There are obstacles to face when dealing with aviation appraisals. Specifically, there are no legal regulations in place for someone to call themselves an aircraft appraiser. All this to mean, you will need to embark on your own journey to find someone with the proven experience and expertise to back up their evaluation.
This will prove to be beneficial in getting the most accurate overview of an aircraft.
3. Sufficient History Data
You don’t want to leave any stone unturned, or you could end up with an appraiser who is only doing their best guesswork. Providing a careful and accurate aircraft valuation consists of relying on a ton of paperwork and documentation. You don’t want to make the mistake of choosing someone who isn’t familiar with or does not have access to critical information regarding your aircraft.
Any reputable aircraft appraiser should have access to:
Engine and maintenance records
Damage and history documentation
4. Large Aircraft Database
Explore your appraiser options and get to know each one. Then compare before you choose. Your appraiser should have enough data within their database to make an educated and comprehensive appraisal.
Just to give you an idea, VREF offers over 600 models of aircraft in their database, while others have only around 160. That’s a huge jump and one that you should look out for, too.
5. Proven Reliability
You’ll need to do what you can to pinpoint valuation and appraisal service companies that have a proven track record of helping their clients. It sounds simple enough. However, when your main focus is on a large asset such as an aircraft, you want to look for specific indicators to determine their worth.
VREF offers an ideal example of this in being a trusted and accurate aircraft valuation service for Aircraft Owners and Pilots Association (AOPA). Recommended by AOPA, VREF provides additional services that allow pilots to receive a more accurate appraisal and verified values.
In addition to its appraisals backed by the AOPA, VREF’s mission is to be a place that buyers, sellers, and lenders can turn to for an unbiased and knowledgeable valuation service.
6. Search And Compare
As a buyer, you will narrow down a budget and essential idea of which aircraft you’re in the market for. Then you will follow this with a search for a small variety of aircraft you’re interested in. When you compare evaluation findings from each one, you can get a better sense of the major differences between each aircraft when you have the data to back them up.
7. Valuations vs. Appraisals
As a seller, valuations will not likely reflect any cosmetic installation, aviation installation, or upgrades. If they are placed as part of the appraisal, the difference may not be stark enough to make a major difference. Remember, the job of an appraiser is to determine a fair market value for the aircraft as a whole and is different from an asking price.
A market value is an accurate ballpark amount that any potential buyer might be interested in paying. An asking price is an amount set by the seller and is usually a good place to start negotiating. This is why a seller who makes several interior and avionic upgrades, part replacements, and routine inspections beforehand may not see everything directly impacting a market value amount.
8. Reasonable Timeline
Fortunately, you shouldn't have to wait too long to receive an objective appraisal. On average, most aircraft appraisals take anywhere from 3 to 5 business days. But tack on another 3 to 5 business days for physical inspections.
If you need to speed up your timeline, VREF offers a turnaround of 2 days for valuations and same-day valuation reports for financial institutions.
9. Availability Of Your Appraiser
Next, you need to find an appraiser who will be available to provide its services on a convenient basis for you. An appraiser who is hard to reach or unresponsive is probably not the person you want to rely on when buying or selling your aircraft. Make sure you are able to reach an appraiser who strives to keep you in the loop before and during the process.
10. Understanding Types Of Appraisals
In line with a full appraisal, you might also run into the terms “desktop” and “physical” appraisal.
A desktop appraisal does not include a physical inspection, nor does it consider maintenance records of the aircraft. The results of a desktop appraisal come from an assumption that the aircraft is in a certain condition based on data within the appraiser’s database.
A physical appraisal is where an inspection of the aircraft is conducted in an extremely thorough and detailed manner. This offers an appraisal with the most up-to-date information possible.
VREF Is Your One-Stop-Shop
When you choose VREF for your valuation and appraisal services, your services are the expert opinions of professional appraisers – experts who are familiar with the industry and know the market from the ground up.
Our professional appraisers continue to enrich their own careers as they often seek out further learning opportunities to help their clients search for honest, unbiased valuations and appraisals. Contact us today for your valuation and appraisal needs.
This article was originally published by VREF Aircraft Value Reference on January 29, 2021.
Tracey Cheek posted an articleNardone and Company, Inc. Joins National Aircraft Finance Association see more
EDGEWATER, Md. – Dec. 4, 2018 – National Aircraft Finance Association (NAFA) is pleased to announce that Nardone and Company, Inc. has recently joined its professional network of aviation lenders. “NAFA members proudly finance - support or enable the financing of - general and business aviation aircraft throughout the world, and we’re happy to add Nardone to our association,” said Ford von Weise, President of NAFA.
Nardone & Company, Inc., is a Veteran owned corporation in their 25th year of business. Experience within Nardone & Company exceeds 40 years in the salvage industry and since their establishment on July 8, 1993, they have been dedicated business partners, producing the highest salvage return on the sale of damaged goods - quickly and cost effectively. The company’s Aviation Technical Services focuses solely on aircraft-related salvage, sales/recovery, current market values, inventory loss, and damage evaluations.
The company’s President, George Nardone, Jr. is a member of the National Aircraft Appraisers Association (NAAA). Mr. Nardone has Airline Transport Pilot Ratings and over 40 years of aviation experience. Their staff of highly experienced and dedicated professionals, with senior certified aircraft and USPAP compliant appraisers, pride themselves on immediate response and rapid reporting with complete documentation on all assignments.
Aircraft appraisals by Nardone and Company’s professionals provide the buyer or seller with onsite inspections, valuation utilizing current market conditions and their sophisticated NAAA appraisal that measures every aspect of the aircraft's value at a reasonable cost. They can also manage pre-purchase inspection and provide consulting services to help match clients with the appropriate aircraft to meet their specific requirements.
Much like NAFA, Nardone and Companyupholds the highest standards in aircraft appraisal throughout the aviation industry as dedicated partners with their clients. “We provide credibility and trust every time,” said George Nardone, President and CEO. Nardone and NAFA are committed to fostering the education and experience necessary to develop the aviation industry as a whole.
For more information about Nardone and Company, Inc., visit www.nardoneandcompany.com.
The National Aircraft Finance Association (NAFA) is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit www.NAFA.aero.
Can You Finance An Aircraft With Over 10,000 Hours on the Airframe? see more
NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, answers your aircraft finance questions.
Question: I am trying to buy this Piper Arrow IV 1979 with only around 450 total time on engine . But the airframe has 15425 total hours on it and the finance company I was going with called and said they could not finance the plane because it has over ten thousand on the airframe. I am trying to see if AOPA or any other companies will finance with that time on the airframe.
Answer: Thank you for reaching out. We tend to get asked this question a lot by our members. All of our lenders have a 10,000-hour maximum limit on airframes as well. The reason for this is high airframe times reduce the value and make it harder to resell in the event of default. Lenders mitigate their exposure by limiting AFTT.
Question: We have a 1979 Navajo Chieftain, N27888. We have recently upgraded all of the avionics for ADSB compliance and repainted and completed a complete interior replacement. We are going to repower and will need to replace both engines. Do you finance a transaction such as this or just complete airframes?
Answer: Yes we can certainly finance the engine replacements. The entire aircraft will be held as collateral. Lenders will finance up to 80% of the cost of the replacement or the total upgraded value of the aircraft, whichever is less. Please give us a call at 800.627.5263 and one of my team members can get you started with an application.
This article was originally published by AOPA Aviation Finance Company on January 7, 2021.
Finding the Best Appraisals for Your Aircraft see more
NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, talks about which appraisal is right for your situation.
Getting an appraisal is a necessary part of the aircraft acquisition process. Because there is more than one type, the question becomes, “Which appraisal is right for your situation? Knowing that may involve a conversation with your lender and should also involve a conversation with AOPA Aviation Finance. Here is an analysis of the three types.
Pricing Digest Appraisal
This is the least expensive, least comprehensive type of the three. A Vref or Bluebook analysis is good for 90 percent of aircraft transactions. That's the good news. The bad news is the analysis is only as accurate as the information put into it and therefore subject to biases (lender perspective, seller perspective, buyer perspective). Also, what isn't part of a book appraisal are the nuanced differences actual market values (based on current demand) versus costs for things like STC modifications, avionics and engine monitoring upgrades, not to mention interpretation of paint and interior quality.
A desktop appraisal is done by a certified appraiser. Certified appraisers may start with the pricing digests, but they then expand their analysis to include market data. That means looking at comparable sales, type-specific trends, as well as average "days on market" for similar aircraft. More sophisticated, more powerful aircraft garner additional appraisal criteria. For example, if the aircraft is a Malibu recently re-engineered into a JetPROP, well that means the aircraft's maintenance schedule must be evaluated differently.
This is also true for turboprops and light jets. The appraiser will have to sift through even more paperwork than normal. Does the aircraft have maintenance expenses coming up? Is it enrolled in an engine maintenance program? Is it up to date with those programs? How much life is left in those programs? A desktop appraisal typically runs $500 to $600.
This is the most extensive, most hands-on, most precise way to appraise an aircraft. Not surprisingly, it's also the most extensive at a price range of $2,000 to $4,000. In a lot of ways, it's like a pre-buy inspection.
The physical appraisal combines all aspects of the desktop and pricing guide appraisal with an actual on-site inspection of the aircraft. This is an ideal inspection for unique, "orphan" or highly-modified aircraft. In the case of those airplanes, comparing them to the more standard, more generic market may prove insufficient. Despite the cost, it's also an ideal way to create a bulletproof assessment of one's aircraft's true value.
This article was originally published by AOPA Aviation Finance Company on October 23, 2020.
Depreciation and Its Impact see more
NAFA members, Mente Group's Jeff Dorrough, Accredited Senior Appraiser and Cole White, VP Transactions, discuss depreciation in business aviation.
In Business Aviation, there are essentially three different types of depreciation that aircraft owners need to be aware of and proactively manage. Each type of depreciation plays a different role in aircraft ownership. At Mente Group, we take the time to educate our clients on the difference and importance of each. The three types of depreciation are Tax, Book and Market.
Tax depreciation can be structured using any of the previously approved methods by the IRS. Aircraft owners can select the form of depreciation that aligns best with their needs. One Example of this form of depreciation is the Tax Cuts and Jobs Act passed in December 2017, which allows aircraft owners 100 percent bonus depreciation in year one of ownership. The purpose behind this was to incentivize individuals and business owners to purchase both new and pre-owned aircraft. However, with each administration change, there is risk of change in this policy. Another approved form of tax depreciation is MACRS (modified accelerated cost recovery system) 5 and 7 depreciation methods which are accelerated methods allowing the capitalized cost of an asset to be recovered over a specified period (5 or 7 years) via annual deductions. We encourage anyone considering the purchase of a private business jet to take advantage of the “knowns today vs. the unknowns of tomorrow.”
The second type of depreciation is for internal accounting, known as Book depreciation. Book depreciation uses the cost of a tangible asset allocated by a company over a stated useful life of the asset. Traditionally, aircraft are placed on the company’s book at some sort of straight-line method. The issue we run into many times, is that the Book depreciation percentage applied does not meet the market realities of today. Often, when a company goes to sell their aircraft, the Book Value and Market Value of the aircraft do not match. Majority of the time, the Book Value is too high as compared to Market Value of the aircraft. This forces the company to take, in some instances, a sizeable write down. In order to mitigate this risk, we work with internal accounting groups to set a more realistic Book depreciation on the front end, thus minimizing risk of the write down on the back end.
The third type of depreciation is Market depreciation and put simply is spot pricing at any given point in time. Market depreciation, unlike the previous forms mentioned, are neither prescribed nor predictable. Market depreciation is greatly affected by macro and micro economic factors such as supply and demand. Most recently the primary driver to Market depreciation has been associated with the impact from Covid-19 related issues. Many companies use Market depreciation in conjunction with Book depreciation in which you have your prescribed depreciation being augmented periodically (annually) followed by a mark-to-market adjustment. This mark-to-market adjustment re-aligns the basis periodically.
In closing, Mente provides many options to assist owners including counseling, analysis and the Mente MVP platform which optically highlights each of these forms of depreciation in one concise visual.
This article was originally published by Mente Group on October 21, 2020.