colemill-baron

New, lower cost fuels could makes today’s piston twins a tempting choice.

On September 8, 2014 the FAA announced that it has selected four unleaded fuels forthe first phase of testing at the FAA’s William J. Hughes Technical Center. The goal is for government and industry to work together to have a new unleaded fuel that reduces lead emissions for general aviation by 2018. Shell and TOTAL, with one fuel each, and Swift Fuels, with two fuels, will now work with the FAA on phase-one testing, which will begin this fall and conclude in fall 2015.

This is good news for general aviation. If nothing else it will get the EPA off of our backs. But will affect the price of airplanes?

Twins Will Benefit Most from Lower Cost Fuels

Prices for most general aviation airplanes have dropped dramatically since 2008, particularly the twin-engine piston airplanes. I saw a nice Colemill Baron sell for less than the price of the conversion and close to the residual value of the engines.

This is pure speculation but if the new unleaded fuels manage to bring us lower fuel prices in the future, then we could conceivably see an increase in the value of these airplanes.  Today’s airplane prices may turn out to be a bargain for those owners looking to move up to a light twin.

N817 panel 2

The insurance company is protected. Are you?

If you have a pristine airplane with a low-time engine, lots of modifications, and above-average avionics, then there is a good chance that your airplane is worth more than your insurance company is willing to insure it for. As a fellow airplane owner I have first-hand experience with this problem that I can help you solve. First let me start by explaining why you should never under-insure your airplane.

Lesson #1: Get a Professional Broker

In 1981  I co-owned a Cessna 170 with a student pilot who flipped the airplane over on landing. The airplane was insured for $15,000 and the repair estimate came to $14,975. The insurance company wanted to total the aircraft but my exceptionally sharp insurance broker, Pat Costello of Costello Insurance Associates, read the fine print in the policy and alertly pointed out that by definition, a total loss was one where the repair estimate exceeded the insured value. The insurance company reluctantly paid to repair our airplane.

Lesson #2: Look for the Constructive Total Loss Clause

Nowadays insurance companies have added the term Constructive Total Loss to the policy. If the loss exceeds a percentage of the agreed value, typically 75%, then the insurance company can treat it as a total loss.

When you purchase aircraft insurance, the amount of hull insurance is an agreed value between you and the insurance company. So if your aircraft is worth $100,000 and you insure it for $75,000 then a loss that does just over $56,000 in damage would allow the
insurance company to use the constructive total loss clause to pay you $75,000 and take the airplane. But with $75,000 you couldn’t replace your airplane.

Lesson #3: Insurance Companies Don’t Recognize Prime Condition Aircraft

If you have an average airplane and insure it for full value, then you likely won’t have trouble getting enough coverage for your airplane. The insurance companies look at the printed price guides and have a reasonable idea of what an average airplane might be worth. But the average 1977 Cessna 180 doesn’t have an instrument panel like the one shown above and the insurance company was not willing to insure my airplane for it’s true value without a certified appraisal. So I hired an NAAA Senior Certified Appraiser to find the actual value of the airplane. The insurance company was satisfy and insured the airplane for it’s full value.

Citation X flyby

Newer avionics and lower-time engines lead the list.

There are lots of airplanes for sale and it’s a buyers market. Brian Jacobson, the Operations Director of the National Aircraft Appraisers Association (NAAA) provides a monthly report to member appraisers regarding the market trends in aircraft sales. Although values are constantly changing, Brian reports that piston aircraft with good paint and interior, modern (read “Garmin”) avionics, and a mid-time engine are selling briskly when the seller price them realistically.

How Not to Set Your Price

How do you know what’s a realistic price for your airplane? You could get a certified appraisal. But why not just set a price above the market value and reduce it gradually until you finally find a buyer?

Here’s why that’s such a bad idea: I recently spoke to a couple who put their Cessna 210 on the market for $60,000 and after twelve months finally agreed to a sale price of $48,000. They paid $50 per month to advertise on Barnstormers but didn’t want to pay the higher price to advertise in Trade-A-Plane. In the meantime they continued to pay hangar rent, insurance, and property taxes on the airplane. That can easily add up to $9,000 over the course of a year. And if you owe money on the airplane there would also be interest expense. Meanwhile, the value of the airplane may be declining.

An Accurate Appraisal Can Lead to a Quick Sale

So once you decide to sell your airplane, it’s best to price it correctly and sell it quickly. If a prospective buyer had come to them during the first month and offered $50,000 how would they know if the offer was reasonable or not? That is why a certified appraisal from an NAAA appraiser becomes so important. For a modest price they would have learned the actual value of the airplane which would have allowed them to price it correctly and sell it quickly. The buyer is going to need a certified appraisal anyway if they choose to finance the airplane and negotiations will be greatly simplified when you produce a certified appraisal.