Nardone 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.
Bonus Depreciation in a COVID World see more
NAFA member, Air Law Office, P.A. writes about aircraft depreciation bonus under the 2017 Tax Act.
The IRS is pretty strict when it comes to 100 Percent Bonus Depreciation under the 2017 Tax Act, especially on the fundamentals.
- Was your aircraft acquired and placed into service after September 27, 2017 and before January 1, 2027 – this one is fairly straightforward
- Is your aircraft ‘qualified property’
- Is your depreciable property of a specific type, including tangible property with a recovery period of 20 years or less, such as commercial and non-commercial aircraft – this one is probably affirmative
- Was your original use of the aircraft the taxpayer’s use or the aircraft was not used by the taxpayer at any time prior to purchase – this one can be a bit tricky
- Is your aircraft predominantly used for a qualified business use – this is going to be tough in the time of COVID and if you don’t meet 51% ore more qualified business use then you will need to explore an alternative depreciation system (ex., Five Year MACRS)
- Is your aircraft used predominantly in the United States – this one can be a bit tricky
There are, of course other nuances like “under contract” and “alternative deprecation models” and if you use your aircraft significantly for nondeductible entertainment travel (ex., vacation) you may be able to take your depreciation and use disallowance percentages to deprecation on a straight-line basis.
The Bottom Line: With face-to-face interaction at an all time low, many owners are in danger of loosing their bonus depreciation benefits. Check in with your financial and legal teams ASAP, before it is too late to address potential pitfalls! Remember, this article is intended to inform you about issues that you should discuss with your financial and/or legal team and is not intended as legal advice or opinion, you should not act on any information contained in this (or any other) article without directly consulting legal counsel.
This article was originally published by Air Law Office, P.A. on August 5, 2020.
Charlie Bravo Aviation's Insider Guide Interview: Aircraft Appraisal with Tony Kioussis see more
In the latest Insider Guide Interviews, NAFA member and co-founder/CEO of Charlie Bravo Aviation, René Banglesdorf speaks with fellow NAFA member, Tony Kioussis, President/CEO of Asset Insight about the top tips regarding aircraft appraisal. Find out about the work Asset Insight does when appraising aircraft and how they work out an aircraft's value.
About Tony Kioussis:
Editor, Aircraft Value & Maintenance Analysis, AvBuyer As president & CEO, Asset Insight, LLC, Tony provides valuations, audits, analytics and consulting services, and a uniform methodology for grading an aircraft’s maintenance condition.
Previously he was VP, strategic marketing, GE Capital’s Corporate Aircraft Finance group; VP, aircraft sales, Jet Aviation Business Jets; and sales director, airframe programs, JSSI, developing the “Tip-to-Tail” airframe hourly cost maintenance program.
An active industry member, Tony serves as Board Secretary for the National Aircraft Finance Association; is a Member of the Transportation Research Board’s Business Aviation Subcommittee; and former Chairman of the Products & Services Member Council for the International Aircraft Dealers Association.
About Asset Insight:
Asset Insights is an Asset Performance Management company that combines decades of engineering and asset management experience with the innovative adoption of digital technology to create unique APM solutions and services.
About René Banglesdorf:
René Banglesdorf is the co-founder and CEO of Charlie Bravo Aviation, an aircraft brokerage headquartered just north of Austin, TX. René has a degree in journalism from Ohio University and serves as the VP of Communications on the International Aviation Women’s Association Board. She is a frequent speaker on topics of business aviation and women’s issues and has written several books, the latest of which, Stand Up: How to Flourish When the Odds are Stacked Against You, is Out Now.
This interview was originally published by AvBuyer on March 15, 2021.
Structuring a Deal - Aircraft Value is Fundamental see more
NAFA member, Gary Crichlow, Director of Aviation Finance for Arc & Co., discusses aircraft value.
One basic axiom drives the due diligence that aircraft financiers undertake, and informs the requirements they impose: Aircraft depreciate in value over time.
While there are many definitions of “value,” the one that matters to a financier is the price a buyer would agree to if the financier ever had to sell. Whether as a scheduled plan to take the aircraft back at the end of an operating lease, or as a contingency plan to sell due to a repossession, financiers need a strategy for actually turning a highly engineered piece of metal into enough cash to cover their outstanding exposure.
To do this, financiers typically employ three tactics:
1. Avoid 100% Reliance On the Aircraft Value – Aircraft values can be volatile, and most financiers hedge their bets by looking to the client’s creditworthiness for security, as well as recourse to a guarantee and/or additional collateral.
Making This Work for You: Generally, the more a lender can take security in your creditworthiness and guarantee rather than the asset value, the less expensive they’ll be. The keys are understanding what security you can offer in exchange for a financing package, and finding the financier that suits you accordingly.
2. Conserve the Value Position – Financiers look to minimize the amount of cash they’d have to realize from a sale by capping the amount they’ll advance, amortizing the balance as aggressively as they can, and imposing a loan-to-value covenant — a mechanism giving the financier the right to call for additional pay-downs to keep the outstanding principal below a certain percentage of the aircraft’s value. While these tactics are relatively simple to understand, in practice, a financier’s ability to actually implement them depends greatly on the competitiveness of the market. Back in 2008, a frenzied market saw interest-only deals (zero amortization) and 100% advances; today, advances average in the 70-80% range, with 90%+ deals only in the most competitive areas of the market (e.g. the U.S. domestic market, and the global market for the uppermost-tier clients).
Making This Work for You: A financier’s flexibility on the terms they offer – and enforce – will depend on how much competition there is for your business. It’s always a good idea to seek alternative offers and compare terms.
3. Protect the Aircraft’s Value – Financiers insist on measures that protect the asset’s value, and – just as importantly – their access to it. Since aircraft are depreciating assets, once a financier takes control of it (whether as a repossession or a scheduled off-lease handback) it’s basically a race against time to realize as much value from it as they can.
This is why they tend to require enrollment in hourly maintenance support programs; restrict the choice of governing law, aircraft registration, and operator to jurisdictions and entities with whom they’re comfortable; expect regular usage reports; and require periodic audits of the aircraft and operator. They also will insist on a tripartite agreement: a contract between them, you, and the operator that binds the operator to deliver the aircraft and records to the financier if there’s a default. These measures are intended to keep the aircraft marketable, provide the financier advance warning of trouble and, if necessary, recover the aircraft quickly.
Making This Work for You: Consider that the same measures which protect an aircraft’s value also protect its safe and high-quality operation. It all comes down to looking after the aircraft: controlling the aircraft’s usage and upkeep by well-trained, well-resourced, diligent personnel. The financier wants to be assured of a well-looked-after aircraft. And a well-looked-after aircraft is what you want to be flying.
This article was originally published by Business Aviation Advisor on January 1, 2020.
Why Use An Accredited Aircraft Appraiser? see more
NAFA member, Louis Seno, ASA, Chairman Emeritus and Special Advisor to the Jet Support Services, Inc. Board of Directors, discusses why using an accredited aircraft appraiser is best.
Keeping a finger on the pulse of your aircraft’s current valuation is crucial, both for tax and depreciation purposes, and when you seek to refinance or sell your aircraft. (Listen to “Regular Check-Ups,” Above & Beyond Podcast, June 2019.)
The demand for reputable appraisers is increasing throughout the business aviation industry. Original equipment manufacturers (OEMs), banks and leasing companies, insurance underwriters, and on-demand charter operators all need knowledgeable appraisers they can trust. But what makes an individual qualified to become an appraiser?
Due to the complex nature of the appraisal profession, education and experience are crucial. However, there are no legal requirements, nor license needed, so anyone can call him- or herself an aircraft appraiser, regardless of their knowledge, skills, experience, or abilities. In response, the American Society of Appraisers (ASA) established an aircraft-specific discipline and designation program, to help assure owners and financial institutions that the aircraft are accurately valued.
An increased demand for aircraft valuation experts in the early 2000s mandated something more be done. And so a 2016 partnership was formed between ASA and the David B. O’Maley College of Business at Embry-Riddle Aeronautical University to establish a universally accepted industry standard. Together, they developed a series of four courses designed specifically for professional aircraft appraisers, enabling those so committed to achieve a new official accreditation.
Successful completion of the courses provides participants with the necessary fundamental appraisal coursework to apply for professional accreditation through ASA, with a specialty in aircraft appraisal. The curriculum covers commercial, business, and general aviation aircraft, including fixed-wing and rotorcraft, and other aerospace assets, such as tugs and ground power units.
ASA’s coursework and testing builds a solid foundation of aviation knowledge. A thorough peer evaluation of appraisal reports is then conducted before an individual can receive the Accredited Member (AM) credentials for two years of experience, or the Accredited Senior Appraiser (ASA) credentials for five years of experience.
Additionally, there is a 100-hour continuing education requirement to be completed during the five years after receiving ASA accreditation. Courses and advanced conferences are offered around the globe for ASA appraisers to learn more about current issues and prepare for future valuation challenges.
“The accreditation process is detailed and meticulous,” said Johnnie White, ASA’s CEO. “We recognize that your turbine aircraft is a multimillion-dollar asset. To ensure its proper valuation, we set high standards on educating our designated members.”
You can secure a qualified appraisal for your aircraft in one of two ways:
- In a desktop valuation, the appraiser will go well beyond a simple pricing comparison by researching the current aircraft on the market, establishing the average days the aircraft model has been on the market, and evaluating any trending data. The appraiser also will assess the maintenance status, look for any major inspection expenses that could be coming due, and perform a cursory check of the logbooks and specifications for the aircraft without looking at the asset. This is the less costly option.
- A physical, onsite appraisal will consist of all of the above, plus a hands-on inspection that includes a thorough examination of the aircraft, including engine and airframe maintenance logbooks. With this option, you will pay for the appraiser to travel to and from your aircraft, for the time spent on the physical inspection of the aircraft and records, and for research of recent sales of comparable make/model aircraft to establish the asset’s current market value.
When your aircraft needs an appraisal or reappraisal for insurance or refinancing purposes, or to prepare for its disposition, choose an ASA-accredited appraiser who has invested in their profession to become the most accomplished and skilled person to appraise your aircraft and to keep a pulse on its value for years to come.
This article was originally published by Business Aviation Advisor on November 1, 2019.
Why 'Pre-Owned' Private Jets Can Be Surprisingly New see more
NAFA member, Chad Anderson, President of Jetcraft, discusses why you should buy a pre-owned aircraft and where to find them.
Pre-owned, vintage, used…from sports cars to designer clothes and beyond, these words don’t usually indicate ‘new’.
But, according to Jetcraft, the world’s leading aircraft sales specialist, pre-owned private jets don’t have to be ‘old’ – in fact, the savviest buyers are now picking up these airplanes after less than a year of use.
So how do buyers find an almost-new aircraft? And what’s bringing these jets to the market in the first place? We asked Chad Anderson, president of Jetcraft.
Why should I buy a pre-owned jet?
Pre-owned aircraft allow buyers to find the long-range or large-cabin model they need at the best possible price. Private jets are valuable but expensive assets, so it’s important you invest in an aircraft that suits your needs and will retain value. With the sophistication of upgrades and renovations available today, pre-owned planes are every bit as attractive as new ones.
Why are these almost-new aircraft available?
As many businesses ‘go global’, and more and more private jet owners fly greater distances for work or leisure, demand is growing for spacious, fast jets that can span half the world without stopping. The top jet manufacturers are responding to this need by releasing new large-cabin aircraft. This influx is driving some buyers to sell their airplane after only one or two years of ownership, so they can upgrade to an even newer model.
Indeed, this summer Jetcraft sold the world’s first pre-owned Gulfstream G500 – an aircraft that only came onto the market in 2018. The speed of this sale shows how demand for almost-new long-range models is at an unprecedented high.
How do I find a pre-owned jet to buy?
There’s a lot of competition for young, pre-owned jets. In fact, our recent market forecast anticipates four times more pre-owned transactions a year than new deliveries by 2023 and we’re seeing many aircraft that are correctly priced, marketed and positioned are sold before they even hit the market. If you’re planning to purchase a pre-owned aircraft, it’s important to work with a consultant you trust and who has a pulse on the market and the latest available inventory.
Which jet should I choose?
Today, most buyers are looking for an aircraft that can fly direct from London to cities such as Seoul and Singapore. If you’re regularly travelling long distances, you want a fast jet that allows you to be in the office or at home with your family as much as possible. Choosing between types at the very top of the market, such as the Gulfstream G500 and G600, the Bombardier Global 7500 and the Dassault Falcon 7X and 8X, can be difficult. Speaking with an experienced professional is invaluable in finding an aircraft that perfectly fits your needs.
This article was originally published in Luxury Lifestyle Magazine on September 24, 2019.
How to Buy an Airplane for the First Time: A Buyers’ Guide for Beginners see more
NAFA member, Jason Zilberbrand, President of VREF Aircraft Value Reference & Appraisal Services, shares the best steps to take when purchasing an airplane for the first time.
Have you ever had the dream of owning an aircraft? Does the thought elicit fantasy-like imagery of you soaring above the clouds as you jettison off to some Carribean island?
If it’s always been your dream to own a plane, it might be more financially viable then you thought. There are not only several ways you can potentially afford the aircraft of your dreams, but also some creative ways to get in the air quickly.
Today, you don’t have to be a billionaire to own an aircraft, especially if you’re looking into a smaller airplane to fly for recreation, or take a loved one on the journey of a lifetime.
So where do you start? It’s essential to follow a process when buying an aircraft regardless of its size. We created this simple guide for beginners so anyone who wants to own a plane can.
Keep reading to learn how to buy an airplane.
1. Know What You Want and Why You Want it
The first thing you need to do is figure out what you need and want in an aircraft. If you’re looking for a cropduster, you’ll need something vastly different than if you’re looking to take groups on luxury flights. In all seriousness, this is a much more difficult decision for beginner pilots. It’s hard to know what you need from a plane, things like its size, number of seats, how far it will fly, to stuff like nearby maintenance centers, insurance costs, and how much it will cost to operate. There is a perfect reason as to why so many models exist as many factors determine the ideal aircraft for you!
I always suggest a first-time buyer go to a fly-in, or an airshow and look at aircraft, get in them, kick the tires and ask questions. You might love how one plane looks, and you didn’t realize it’s just too small for you. Likewise, seeing them all in person close to each other will help you identify traits not so apparent at first.
2. Set Your Budget and Add 10%
Once you know the type of plane you want, you can start looking to determine the approximate price of that type of aircraft. Being able to stretch your budget is where some creativity and due diligence will pay off. There are aircraft for every budget. So who will finance it?
Did you know AOPA FInance sources aircraft loans? They do, and they work with a fantastic group of lenders from small regional banks to credit unions. They make the process simple, and you might even be able to borrow to include refurbishment or some updated avionics. After all, now that you are buying an aircraft you at some point decide to customize it or utilize newer avionics equipment. Your lender will help!
3. Kick Tires, Search, Search and Search
When a market is hot, finding aircraft is not easy. You will often find out that the plane you had your eye on was also the dream machine of 40 other buyers and someone beat you to it. I tend to see this occurring more and more in specific piston markets. So what’s the trick to finding a great aircraft? For one, I like to use Facebook Groups, Owner Forums, and maintenance facilities. However, I have news for you; if you are only interested in a private sale, you may be missing out on an opportunity to develop a relationship with a local dealer who will not only support your aircraft beyond the purchase but be there when its time to upgrade. HINT, some dealers, if you are friendly, might even give you the heads up about an aircraft someone else is thinking about letting go. So don’t limit yourself to a marketplace or classified listing. Get active in the community, and make friends in those forums.
4. Get a Verified Value Report the “CarFax” of Aviation
Once you’ve found a plane or planes within your budget that looks promising, you’ll want to get a VREF Verified Report. The Verified Report is the “CarFax” of aviation, and it provides all that you need to know to decide about which aircraft to focus your buying efforts.
Our report includes Value history, market demand, serial number specific Retail Value, Damage History, and much more. These, along with the rest of the report, will give you everything you need to decide if you want to keep pursuing that plane. It can also help you in the negotiating process.
Once you know what you want to pay, you can determine what you should pay by using VREF. So whats next? Its time to make the offer, which most of the time a buyer will send a written offer. However, let’s not jump ahead too far. I always suggest you find an aviation attorney to assist before buying so that he or she can set up a proper entity to own the aircraft, which will also protect you and your estate if there were ever liability. You will also want to talk to your accountant so that you understand what the tax ramifications are and where to establish your closing venue. Once these components to the purchase are complete, you can make your offer, provide proof of funds or your deposit to the seller and have your lender make the arrangements for your loan. Keep in mind, most if not all of the banks will require an Appraisal of the aircraft before they will send you a commitment or approval letter. The reason being, the bank needs to know what the asset is worth at that moment in time.
6. Research Insurance BEFORE you commit
Once you know which plane you’re going to buy, you’ll want to look into insurance. Make sure you have a broker or agency you can work with and don’t leave this to the last minute as you might be wishing you hadn’t if those premiums come in substantially higher than your budget was forecasting. Insurance brokers are so crucial to a successful aircraft purchase that I can not emphasize enough you need to build a relationship with someone. There will also come a day that you will need solid advice on how to deal with a claim, so get a reputable agency to set up your binders.
7. Buy Your Aircraft!
At this point, the only thing that’s left to do is to finalize the purchase!
Phew, that wasn’t so bad, was it? Now that you are an aircraft owner, the world is at your fingertips. So pack a bag, grab a friend or family member, and explore!
How to Buy an Airplane: Are You Ready?
Now you know how to buy an airplane. As you can see, it’s a relatively simple process that’s extremely rewarding.
If you need a loan to make this purchase, check out our post on the aircraft loan process. There, you’ll learn everything you need to know about getting the money you need now to make your dreams come true.
This article was originally published by VREF Aircraft Value Reference & Appraisal Services on July 26, 2019.
The Dos and Don’ts of Hiring Aircraft Appraisers see more
NAFA member, Jason Zilberbrand, President of VREF Aircraft Value Reference & Appraisal Services shares what you need to know when hiring an aircraft appraiser.
The joy of taking flight is one like no other. The business of getting to that take off though can be another matter.
The purchase or sale of an airplane isn’t exactly an everyday sale. For many buying or selling an aircraft, it’ll be their first time at the rodeo. That’s all the more reason to be prepared when getting into an aircraft transaction.
Hiring an aircraft appraiser is an important part of the aircraft transaction process. If you’ve never worked with an aircraft appraiser before, it’s essential that you prepare yourself for the experience.
Read on, and we’ll walk you through all the dos and don’ts of working with aircraft appraisers.
Understanding Aircraft Appraisal
If you’re going to get an aircraft appraised, hopefully, you understand why you’re taking such a step. But many potential aircraft owners simply call an appraiser up because they’re told to do so. They don’t take the time to understand the reasons behind the recommendation.
A proper understanding of the aircraft market is hard to get. A big aircraft company is likely to have a team of appraisers on hand at all times who keep incredibly detailed track of aviation industry trends and costs. Those unlucky enough to not own a multi-million dollar company have to outsource to receive such expertise.
An aircraft appraiser uses their unique knowledge of the aircraft and market trends to properly estimate the value of a given aircraft. Appraisers are held to a high standard and must be able to back up their estimates with a huge amount of data.
Their estimates must hold up to scrutiny even in a court of law.
You might need an appraisal for a variety of reasons. You can use an appraisal to properly find the right selling price for an aircraft or to see if the buying price for another is reasonable.
There are many other reasons to have aircraft appraised. You might be refinancing a loan, looking at an insurance policy, or just curious about the current value of your aircraft.
It’s important to understand the purpose of your appraisal. This way, the appraiser you hire can take special care to analyze discuss areas most closely related to those goals.
Do Find Someone Qualified
The aircraft appraisal industry is unregulated. That means that anyone out there can technically give a value amount for an aircraft since there are no required standards for training or experience.
That doesn’t mean you should throw a dart at the wall and hope you hit someone who knows what they’re talking about.
The Appraisal Standards Board develops and publishes a set of standards on behalf of appraisers. Ensuring that your appraiser lives up the standards of that publication can be important.
There are two organizations in the aircraft appraisal world that are known for their great reputation. They are the N American Society of Appraisers (ASA) and the International Society of Transport Aircraft Trading (ISTAT) and they both have long histories. VREF has a substantial staff of Senior Accredited Appraisers through both the ASA and ISTAT. It is important to note that hiring an appraiser is hiring his knowledge and experience. If the appraiser is not qualified to appraise the asset then he/she should bring in an appraiser that is qualified, or the report would not be considered USPAP compliant.
Both organizations provide a wealth of training for their members. A badge of certification from one or both of these organizations can mean a lot in terms of an appraiser’s credibility.
Regardless of who you go with, you should ensure that the appraiser you hire qualified and experienced when it comes to the kind of aircraft under consideration. Ensure that a field visit is part of their process.
An appraisal is a tricky business and there are many ways to come to a final number. The last thing you want is someone who doesn’t know what they’re talking about giving you a number that will lead you in the wrong direction.
Don’t Get Too Subjective
A proper appraisal of an aircraft will be an objective evaluation of the aircraft. You are filling out a balance sheet, not a sales pitch. As such, don’t be surprised when certain selling points don’t add up to the valuation you might wish for.
Having the wrong floor plan or missing critical equipment for compliance might be a recipe for lower than anticipated values.
Just because you have a certain taste for a design or feature, doesn’t mean that aspect will add value to your aircraft. There are certain aspects you might find cool about an aircraft that actually detract from the value.
Enjoyment is subjective after all, and it’s important to keep this in mind when it comes to appraisal.
Do Consider Databases Used
An appraiser will need to pull and use a certain market database for their analysis. Publications are consulted frequently by aircraft appraisers, but not all these publications paint the same story about the state of the market or industry.
VREF Aircraft Value Reference & Appraisal Services, delivers aircraft and engine data through online subscription services and published quarterly digests. VREF provides valuations, appraisals and advisory services to a world-wide client base of aviation professionals including, banks, financial institutions, lessors, manufacturers, aircraft operators and suppliers. VREF Aircraft Value Reference & Appraisal Services plays a key role in informing decisions and identifying opportunities within the aviation industry. VREF is also the official Valuation Guide and Appraisal company for the AOPA.
The database used for reference can have a huge impact on the final estimated value of an aircraft. As such it’s important that you, as the hiring party, stay well informed.
The Dos and Don'ts Of Aircraft Appraisers
Aircraft appraisal can be a tricky business. If it’s your first time working through an aircraft transaction, it can take a minute to get used to working with aircraft appraisers. But with the above tips, you’ll be well on your way to a proper valuation.
Need more info about aircraft ownership? Feel free to contact us with any questions.
This article was originally published by VREF Aircraft Value Reference & Appraisal Service on April 18, 2019.
What Is the Best Personal Aircraft to Buy in 2019? see more
NAFA member Jason Zilberbrand, President of VREF Aircraft Value Reference & Appraisal Services, shares advice on finding the best personal aircraft in 2019.
When buying an aircraft for personal use, there is a litany of factors that will go into your decision-making. Whether your intentions are to take day trips for the weekend or intercontinental excursions, finding the best personal aircraft to meet these needs will come at wildly different price points.
In addition, the number of passengers and on-going costs for the aircraft can affect your decision.
Keep reading for a VREF breakdown of various examples for the best personal aircraft you can buy in 2019.
The most utilitarian and hassle-free aircraft are single engines planes. With price points in the low or sub-six figures, a single-engine plane can get you flying for a low cost of ownership.
Here are some of the best buys for 2019:
Pre-Owned Beechcraft Bonanza
- Price $100k – $375k
- 765nm range
- Seating for 6
Pre-Owned Cessna 206 Stationair
- Price $100k – $225k
- 730 nm range
- Seating for 6
- Features a large rear “clamshell” door easy load-ins
Other notable players in this category are the Piper Cherokee Six, Piper Malibu Mirage, and, of course, the trusty Cessna 172.
Pilots enjoy the redundancy or dual engines of a twin. Twins handle larger payloads and faster speeds, as well as faster takeoff and climbing speeds.
These tend to cost less than high-performance single engines but garner higher ownership costs due to the second engine.
Examples of deals in 2019:
Beechcraft Baron 58
- Price $200k – $1.4 million (new)
- Seating for 6
Pre-Owned Beechcraft Baron 55
- Known as the “Baby Baron”
- Price $75k – $175k
- Though smaller, it comfortably seats 6 passengers
Other Notables: Piper Turbo Seneca II, Cessna 310R
Typically known as a “Step-up airplane,” turboprops have taken a huge share of the market from the multi-engine planes of the past. While pilots originally bought twin-engines as a way to make them and their families feel safer, turboprops have made great leaps in sophistication and reliability. Their short takeoff and landing capabilities make dealing with emergencies much easier.
Turboprops do incur higher purchase prices and operating costs. They are extremely efficient at lower altitudes and slower speeds.
They enjoy the ability to access smaller airports and runways and are ideal for day trips of 500nm or less (think, Miami to Nassau and back). Be sure to enlist the help of a professional aircraft appraiser because of the substantial jump in price.
Here are some of the standouts:
Piper Meridian (2002 – 2015)
- Price $650k – $1.5 million
- 1,000nm range
- Seating for 6 in plush interiors with upgrades
TBM 700 (1990 – 2005)
- $750K – $1.5 million
- 1,350nm range
- Seating for 6
Best Personal Aircraft – Jets
Jets are at the top of the personal aircraft hierarchy. They fly further, faster and with more people than the other categories on this list.
Jets have massive price tags and ballooning maintenance and hangar fees. But for the business or personal traveler who demands speed and global access, this is the personal aircraft of choice.
Very Light Jets
Cessna Citation Mustang
- “Most bang for your buck” smallest member of the Citation Family
- Price $1- $2 million
- 1170 nm range
- Seating for 5 plus 1 crew
- The only brand new twin-engine jet for $3 million
- 1125nm range
- Seating for 5 plus 1 crew
Cessna Citation CJ3 or CJ3+
- Price $3.75 – $6 million
- 2,000nm range
- Seating for 6 passengers plus crew
Embraer Phenom 100
- $1.75 – $2.25 million
- 1,178nm range
- Seating for 5 plus crew
The Best Fit
As mentioned above, finding the best personal aircraft for you is a combination of factors that fit your lifestyle and intentions. Yet, both a hobbyist and a global businessperson can enjoy the freedom that private aviation provides.
With any aircraft purchase, be sure to reference our reference guide to make sure you have the most accurate data and valuations.
This article was originally published by VREF on May 2, 2019.
How to Know When It’s Time for a Private Jet Upgrade see more
NAFA member, Jason Zilberbrand, President of VREF Aircraft Value Reference & Appraisal Services, shares what to look for when determining if you are ready for a jet upgrade.
If you’ve got a private jet, congrats. You’re one of a very select few people who do.
Having a private jet is a unique joy. Skipping TSA security checks, avoiding cramped quarters, and traveling on your own schedule are all perks that justify any expenditure.
But what if your experience is lacking? It might be time for a private jet upgrade.
If you’re thinking it’s time to revamp your jet but aren’t sure, look no further. VREF will show you a few signs that it’s time to refurbish that baby.
The Exterior Is Looking Rough
Considering planes regularly soar through the sky for long periods of time over great distances, it’s understandable that they’d accrue a significant amount of wear and tear over the years. The most obvious form that wear takes is cosmetic.
The day you bought your jet was probably a joyous occasion. A shiny, gleaming vehicle that was prepared to literally shoot you into the clouds. Only, these days, it might not be so shiny anymore.
If you’ve found yourself less enthralled with how your jet is looking, it might be time for a new paint job. Sometimes, the only thing you need to reignite that initial love affair is a fresh look. It’s one of the simplest ways to get your jet looking brand new again, so if it’s looking worse for the wear, don’t hesitate to slap a fresh coat of paint on it.
The Interior Isn’t Looking So Hot Either
When your jet takes a beating on the outside, it doesn’t have much practical effect on your experience. It might not be as great to look at as it once was, but your trip goes as planned, you won’t be looking at the exterior of your jet during the flight.
The interior of the jet is what really counts when it comes to having a positive flying experience. A rundown or outdated interior cabin can make travel a serious downer.
It might be something as simple as cosmetics. If you just don’t like the look of your cabin anymore, revamp it. A sleek, modern update can often do wonders.
That said, it might be an issue of actual convenience. After all, a private jet isn’t much fun without all the proper amenities.
If your jet’s tech seems like it’s been lifted straight from a 60s Bond film…Well, actually, that sounds pretty cool. But you know what we mean. Your jet’s features should feel modern.
Bluray players, up to date television technology and other little details can make or break a flying experience. Don’t let your jet live in the past. If it feels dated, it probably us. Give it a much-needed overhaul.
Invest in a Private Jet Upgrade
If you think you need a private jet upgrade, you most likely do. Don’t let your experience be ruined by an aging piece of equipment when all it would take is a fresh look to bring it into the modern age.
On the other hand, you might be looking to sell your jet and get something new. If so, make sure you’re getting the job done right. Get a top quality professional appraisal right here.
This article was originally published by VREF Aircraft Value Reference & Appraisal Services on April 22, 2019.
Maintaining Objectivity in a Subjective World see more
NAFA member Tony Kioussis, President of Asset Insight, discusses an appraiser's function in the valuation of an aircraft.
We occasionally receive telephone calls that start with (what we call) the famous 4 words: "This can't be right." The caller then proceeds to explain why the figures displayed by eValues, our automated valuation system, do not match their view of the world, and the implied - if not stated - expectation is that we will correct the transgression. Knowing the artificial intelligence program running eValues is not infallible, we try to listen very carefully to ensure we understand the caller's issue. We then point out the objective path that led to our system's conclusion.
Most people understand that an automated system looks at everything with complete objectivity, yet some clients cannot help but "feel" that our conclusions are wrong. Feelings are fine. The problem is they provide a subjective viewpoint. Our goal is to minimize the subjectivity to the maximum extent possible, and we have programed eValues to think the same way. Subjectivity is a very slippery slope that an appraiser can follow to an unsupportable conclusion. We know. We have encountered some of these folks during expert witness testimony and their 'feel" did not serve them, or their clients, well.
Take, for example, aircraft exterior paint. The Asset Insight Maintenance Rating scale ranges from -2.500 to 10.000, and the rating for new paint objectively depreciates to 0.000 over 7 years. Why? Because in speaking with numerous paint facilities, that has ben the average life expectancy of aircraft paint and styling. The paint on any specific aircraft could (and many times does) exceed 7 years of service, but odds are that a buyer will adjust their offer price for the cost to repaint the aircraft if its paint looks marginal, or if the paint scheme is dated.
We once had a discussion with an owner who believed his aircraft's paint should be rated at an 8, even though more than 15 years had elapsed since the aircraft was last painted, because the aircraft had been kept in a hangar. Well, the aircraft didn't do any of its flying inside of the hangar, but it certainly experienced the elements that affect paint, such as rain, sleet, hail and UV rays from the sun each time it flew a mission.
Next is the issue of an aircraft's interior condition. Again, there are those who will rate their aircraft's interior much higher than the 0.000 it achieves when it has aged more than 8 years. The interior's condition could be good, but styles change, and interior colors and schemes become dated. The colors that were prevalent some years ago are probably out of fashion today, and even the TV monitors may need to be replaced with high-definition units.
Notice that we are not suggesting that the paint was peeling, the interior fabrics were torn, the leather was worn, or the wood on sidewalls and table-tops was damaged. In fact, the paint and interior may be perfectly acceptable to the current owner and the prospective buyer. However, unless transaction prices allow us to value the asset higher, the only objective basis that intelligence, human or artificial, can rely on is the facts.
Another client valuation angst is the market depreciation pace of cockpit and passenger cabin "technology," which is often valued lower than some people "feel" it should be. What many are not considering is the pace of technology obsolescence. Avionics manufacturers, along with cabin communication system OEMs, are introducing new equipment every few years. Considering capability and dependability - not to mention safety - improve with each iteration, values of aircraft not equipped with the latest technology can depreciate more rapidly than "feels" fair. But is that not to be expected?
Consider a scenario where you install a new avionics suite after its technology has been available for some time. A couple of months later a more advanced system is introduced, and many aircraft owners adopt it for the make/model aircraft you operate. While perhaps unfair, sellers of these newly-equipped aircraft are likely to expect more (and buyers are likely to pay more) for those assets, at the expense of aircraft equipped with your less capable system.
One item with the potential to dramatically alter an aircraft’s value is Hourly Cost Maintenance Program (HCMP) enrollment, and the amount of value change can be influenced by several factors, and the specific level of coverage the program provides is certainly an important one. More than one level of coverage is often made available by the OEM, and there are independent companies offering such programs with differing levels of coverage. Another important factor is a program’s transferability. If it cannot be transferred at time of sale, the program holds no value for the purchaser.
However, the primary HCMP value driver is the actual differential between what buyers are willing to pay, by make/model, for aircraft enrolled on HCMP compared to those not enrolled on a program. Also, if only 20% of your make/model fleet is enrolled on a program, don’t expect the value increase to be dramatic. On the other hand, if 80% of your make/model fleet is enrolled on a program and your aircraft is not, expect a value deduction on your asset. Why? Because your aircraft’s specification relative to HCMP coverage is clearly not preferred by most buyers. You may find a buyer who does not wish to acquire a HCMP-covered aircraft, just like you may find a buyer willing to acquire an aircraft sporting an outlandish paint scheme. However, rest assured, if they are an experienced buyer, their offer will more than likely reflect your asset’s HCMP coverage status.
By way of seeking an increase in their aircraft’s valuation, some HCMP-covered aircraft owners point to the higher Ask Prices often sought by sellers whose aircraft are enrolled on a specific level of HCMP coverage. Regrettably, higher Ask Prices do not always translate into higher Transaction Values – the only relevant figure when it comes to valuing an aircraft.
Lastly, maintenance condition can be a serious value driver – particularly following a major airframe inspection or engine work. While some owners “feel” that an aircraft’s valuation should increase by an amount equal to the average cost of a major maintenance event, that is usually not possible. In fact, the value applied to maintenance events will decrease over time, as will the value applied to the other items mentioned in this article, including HCMP coverage.
As an aircraft ages, there will come a time when an engine overhaul, or even a major airframe inspection, will be more expensive than the aircraft market value. The asset’s owner may elect to invest $1 million for a double-engine overhaul, and prospective buyers may become preferentially fond of this aircraft, but that does not mean a “willing buyer” will be found who will pay $1 million above the $300k to $400k transaction price range achieved by aircraft of this make/model.
Individually, most of these items are likely to have a negligible effect on an aircraft’s value – excepting HCMP coverage. As a group, however, even if only some of them are misinterpreted or computed by “feel,” the consequences can be an illogical and erroneous conclusion.
An appraiser’s function is to provide “an opinion of value.” Thus, valuing an aircraft higher or lower for some specific reason is well within their job description, and their purview. At Asset Insight, when computing a figure (except in the case of an eValues calculation), we try to ensure that “reason” is based on objective factors to the maximum degree possible, just in case we’re asked to support our conclusion through expert witness testimony.
This article was originally published in Professional Pilot Magazine, May 2019, p. 14.
5 Things That Significantly Matter in An USPAP Appraisal see more
NAFA member, Jason Zilberbrand, President of VREF Aircraft Value Reference & Appraisal Services, discusses what you should look for in USPAP Appraisals.
Imagine that you’re trying to buy an aircraft and you get an appraisal that looks great. Then, you acquire the aircraft and you realize the valuation was way too high. This is a huge problem, especially when planes can cost upwards of $700,000!
For most people, this would be enough to boil their blood. This is why it’s so important to understand your USPAP appraisal and why it matters in this process.
To avoid this, we’ve created a guide to USPAP appraisals so you don’t have to do the research on your own.
Let’s talk about what really matters in an aircraft appraisal.
The 5 Most Important Factors in a USPAP Appraisal
Remember: there are no actual rules regarding the value of aircraft. This means that anyone selling an aircraft can apply a price point to the craft regardless of what the actual value “should” be.
Because of this, it’s important to be highly aware in your judgment, so we’ve compiled some great tips here to help you do just that.
1. Your Purpose
Each USPAP appraisal is slightly different because the contents of the report depend on the purpose of the consumer. This makes knowing your purpose very important so you can convey this information to your appraiser.
Doing so will make sure that your appraisal report is as accurate as possible.
2. Your Appraiser
Much like your realtor, your doctor, and your lawyer, you only want the best people helping you, especially when your money is on the line.
Know who your appraiser is, what kind of business they do, and their overall reputation. They should be able to assist you in reading the aircraft’s history and evaluating risk factors – it could mean the difference between a successful and terrible USPAP appraisal.
3. An Understanding of the Aircraft
Like we stated above, it’s important for you and your appraiser to understand the aircraft and its history.
Depending on its environment, how much it’s been flown, and where it’s kept, there could be issues that are hidden even from initial inspections. Be wary of people who are too quick to close.
4. The Aircraft Logbook
The logbook is kind of like the roadmap to the aircraft. In a USPAP appraisal, this is one of the most important documents you can have at your disposal.
Use it as a diagnosis for the aircraft – was the owner proactive in fixing problems? Were there a lot of unfixed issues?
5. Taking Your Time
Finally, don’t rush the process.
You wouldn’t jump on a car just because you want a car – you should always evaluate accident history, features, and technical information that matters to how the car operates. The same is true of aircraft.
In your USPAP appraisal process, never rush to a conclusion before you know the full picture.
Now that you know what to look for in a USPAP appraisal, you might be asking, “Ok, where do I start?”
Check out our other blog posts – we offer trusted valuation guides to aircraft, like how the value of aircraft can fluctuate, so you can make the most educated decision with your money.
This article was originally published by VREF on May 6, 2019.