Al Marsh

Used aircraft prices attract attention, few sales; Dealers can’t move new aircraft or jets

March 18, 2009 by Alton K. Marsh, Senior Editor, AOPA Pilot

Used piston-engine aircraft buyers are at last returning to showrooms but only to kick the tires and leave. Jet prospects and customers for new piston-engine airplanes don’t even show up. It’s not just buyers and sellers under stress–dealers face a daily financial dilemma of their own.

Mike Long of Air Orlando Sales in Florida says a 2005 Cessna 172S with 1,900 hours on it that in a normal economy would sell for between $155,000 and $162,000 is on the market for $135,000. The aircraft is equipped with the Garmin G1000 avionics suite. That’s bringing in tire kickers, but they are still reluctant to sign the deal.

Long said the bad economy started in 2006 but, “Everyone was too busy to see it coming.” In 2007 the economy slowed noticeably, Long said. Then almost overnight on a day in mid-October 2008 the crisis hit with unexpected intensity.

Howard and George Van Bortel are also seeing lower prices at their Cessna dealership in Arlington, Texas, where a 142-hour total-time Cessna Skylane that in a normal economy sells for $305,000 instead costs $269,500. But they are finding buyers. By March 18 they had equaled the sales total of 10 aircraft sold in March 2007. However, they sell jets, too.

The business jet story for the Van Bortels is different and with a wicked twist–no buyers. A used Cessna Citation CJ3 that in a normal economy would cost $7 million is going for $5.5 million. A CJ2 that in a normal economy would cost $5.5 million is priced instead at $3.5 million. And a used older straight CJ that last year sold for $2 million is available for $1.5 to $1.7 million. They noted that the current issue of Controller lists 748 used Cessna jets for sale, but a year ago the number was half that.

The recession is hard on the dealers, too. Rich Manor of Tom’s Aircraft at Long Beach, another Cessna dealer, described what it’s like on a daily basis to sell aircraft in this market, and his e-mail to AOPA Pilot is printed verbatim below.

What follows is an e-mail from Rich Manor of Tom’s Aircraft:

“Aircraft sales have dropped dramatically over the last nine months, particularly new aircraft. Used aircraft prices have dropped significantly, so there is at least action on pre-owned aircraft which are market priced. The same cannot be said for new aircraft.

 “We are a Cessna dealer, and Cessna has cut production,” Manor continues.  “However, even at the lower volume of new aircraft entering the market, we are still carrying more inventory. Our holding costs are higher too, as wholesale financing has dried up and we’re paying higher interest rates for longer periods of time on our inventory aircraft.  Those factors coupled with deep discounts required to sell new airplanes, make it very difficult to make a profit in this market.
 
“Retail financing is also tougher to get as lenders have tighter qualification requirements, and are much more conservative on terms. For example, Cessna Finance Corporation, who used to do 80 percent of our deals which were financed, raised their retail rates to almost two full points above the competition on single engine piston aircraft.
 
“As far as turboprops go, we are also a new Caravan dealer, and that market has slowed as well although not nearly as bad as light piston aircraft. Cessna recently upgraded the Caravan to [Garmin] G1000 and TKS [deicing system], so we’re still working through the backlog of orders that those two enhancements created. Even though production volume on Caravans is relatively low, in my opinion, if this market continues, it’s only a matter of time before the Caravan market will suffer.”
–Rich Manor, Tom’s Aircraft
  

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5 Responses to “Used aircraft prices attract attention, few sales; Dealers can’t move new aircraft or jets”

  1. Clinton Bersuch Says:

    This is probably a case of semantics but I have to chuckle at the use of the word “should” in this post as it relates to the price of an airplane. “Cessna Skylane that should sell for $305,000 instead costs $269,500.”

    No, the airplane “should” sell for whatever the market can bear. In this market, that Skylane is worth $269,500 (or maybe even less) and that’s exactly what it “should” sell for. Same with those Citation examples.

  2. Richard Estes Says:

    I agree with Clinton. Our mind set can not remain on expanding value for the hardware we call an airplane. During the time I have been interested in aviation, the value of a used aircraft kept pace with the cost of the aircraft when it was new. Today, we are seeing a decent in price that is reflecting the value Today. Be realistic in pricing your aircraft. It will still sell. Don’t look for a home run on pricing. Lower your expectations.

    If we have a need to sell our airplane, we will have a new price set point. This is all supply and demand. Fewer are demanding. Over time, more owners are wanting to sell. Long wait times to sell have also reduced the price. The supply tube of used aircraft just keeps getting fuller with little coming out the other end. Thus, the decrease in value of the current stock.

    Bottom line, if you currently don’t need to sell your aircraft, good for you. If you do need to sell your aircraft, look carefully at what the current market looks like, then price accordingly.
    Another problem is the Government. If they start to tax every use of our pride and joy, that will also have a downward effect on pricing as well.

  3. nick danger Says:

    Aircraft sales have been hampered by individuals like Jim Lafferty of Lafferty Aircraft Sales in San Jose who are crooks and do a dis-service to the honest guys out there.

  4. William E. Horn Says:

    Aircraft finance, like sales, has suffered greatly through this period. Having said that and notwithstanding the additional scrutiny that banks are demanding, there are plenty of funds available to finance piston, turbine and jet aircraft at the traditional terms and fixed interest rates in the mid-5% range for a well-qualified buyer. .

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