Tuesday, March 26, 2013

Understanding the Value of Aircraft Aftermarket Upgrades. Step 5 of 9

The Value of upgrades:

Hello, Jake Huling here with Aircraft Sales Advisor. I’d like to welcome you to the fifth report in a new series called, 9 Steps to a Successful Sale or Purchase of Your Plane. 

In the last report we discussed Selling a Plane on Your Own and the pros and cons of this approach. We also talked about the importance of keeping control of your information; how to handle brokers when they call you about the plane you are selling or wanting to buy. And why, when you are buying or selling a plane on your own, it’s so important to know your numbers. And to know why a plane is worth what you are asking, or is only worth what you are offering.

You can also check out the first video in this series were we cover the Top Complaints about Aircraft Brokers.

In this report we’re going to cover one of the more confusing factors when determining a plane's value. And that is aftermarket upgrades. And we really want to look at this from three different sides. One, is if you own a plane with upgrades, what they are worth. Two, if you own a plane and are thinking of adding upgrades, what makes the best type of upgrades and where should you spend your money. And three, if you are buying a plane, what upgrades you should be looking for and how much you should pay for them. So let’s take a closer look.

Aftermarket upgrades.
Obviously we can’t cover all upgrades for all of the Jets and Turboprops out there in this one report, so for today’s example I am going to use the same plane I used in the last report, the King Air B200. Now, before I go on, I want to tell you not to get to caught up on what each of these upgrades are. Instead focus on the type of each upgrade, and the impact they have in each of the three categories just mentioned. That way you can apply this to any Jet or Turboprop.

As we look at each example it’s important to remember that there are really two types of value that an upgrade can add, monetary and desirability and each of them add to a plane's value. An example would be if you had two planes for sale with fairly equal prices, total times, and the same year, but one had more upgrades, then that plane will often be the one chosen.

Let’s start with Exterior Options
We are going to look at the different ways each upgrade adds value and how well it holds its value.

And remember, with upgrades, it’s important to get an actual estimate for your plane and in writing, so you have a number you can count on. Also, depending on where you go, the market, and inventory, prices will vary.

   Engine upgrades. This is one of my favorites; a King Air engine upgrade can add a large performance gain and value to your plane. And if changed out when an overhaul is due, especially if it’s a third overhaul on a King Air, you could even save some money and it comes with a nice new engine warranty. You fly faster, you fly farther, and that means you not only get where you’re going quicker, but it also means less total time added your engines and airframe.

Now, make sure you choose a good, reputable facility. If you need any recommendations give me a call or send me an email, I would be happy to pass on some good recommendations for you. Over all, this upgrade does a good job holding its value and it definitely adds desirability to a plane. So this is an example of the type of upgrade that gives you value on several levels: performance, passenger comfort because of faster flights, and it also helps keep the value of your plane up because of less time on engines and airframe.

  Upgraded 4 bladed props. Upgraded props go very nicely with engine upgrades. It adds even more performance and can even make the cabin noticeable quieter in the process. And for the King Air, you also have an option for a new Swept Wing Prop by Raisbeck. This is the first business aviation turbine prop using swept-wing technology. Its adds even more performance for takeoff, climb, and landing, keeps the noise deduced and looks really good on the plane. You can see even more Raisbeck Swept Trubofan Prop pics on this link; it really does make a big difference in how it looks.

This is another example of the type of upgrade that gives value on several areas. You’re not going to make money on it, but it will hold most of its value and you get a quieter cabin, more performance, and with the swept props, it also definitely adds to the look of the plane.

It's also an example of an upgrade that builds on top of another upgrade. So the upgraded props on their own, without the engine upgrades, will not give you as big a performance increase as with them.

And the same goes for the upgraded engines without the upgraded props.

Any upgrade that compliments another upgrade gives you almost a bonus value.
    Ram Air Recovery. 
I  I like this one because its an interesting example. It does give you some increase in climb and cruise, help keep the engines cooler, and saves some on fuel. But it mainly only gives you value in one area.

It doesn't change the way the plane looks and it really doesn’t give the passengers a more comfortable flight.

It’s still a good upgrade but not everyone would see the value of it. If it were already on a plane you were thinking of buying, that’s a bonus. But if you were considering adding it to one you own, I would tell you if you were keeping the plane for a while, and you wanted it just for you, go for it. 

But don’t add this type of upgrade if you’re thinking it will help you sell or make you money. With the right buyer will it hold some of its value and add some desirability.

Let’s take a look now at some Interior upgrades

    New Interior and New Paint. 
   I put these two together even though paint is obviously exterior because they are often done at the same time and go so well together. This is a great way to increase the desirability, value, and appearance of your plane. It can take a dated or worn-out looking plane and make it look and feel like new. And it’s also a great way to customize your plane to your personal tastes and needs. These two make by far the biggest visual difference and feel to a plane, but be careful because it’s also very easy to get carried away with costly options.

These two upgrades combined give you value on several levels: passenger comfort with a new interior, a new and custom look for your plane with the paint, and they definitely help you sell when your plane looks new inside and out compared to one that looks worn and outdated.

   And lastly, let’s take a look at Upgraded Avionics. 
   This is an upgrade that has one of the biggest ranges in cost. You can go from a basic GPS unit like a Garmin 400, all the way up to a top end Garmin G1000 fully glass cockpit. The cost can range anywhere from around 15k for a basic GPS unit all the way up to 350k for the Garmin G1000. This one does add value on several levels. On a King Air for example, it can save you hundreds of pounds by getting rid of heavy old instruments and miles of wire, be much easier to navigate, give you a more modern look in the cockpit, and definitely add to safety.

However, if you are going to upgrade the avionics do it because you want to, not because you want to make money. Over all this upgrade does hold some of its value and depending on what you have, it will give you added desirability. You just won’t get your money completely back on this one.

There are of course many other options we could talk about, but this gives you an idea of what to look for in upgrades and the different ways they can add value. It’s also important to consider what you want and what you really need. I’ve seen many customers struggle because they haven’t prioritized their wants and their needs list. And because of that, I recommend going through your list and deciding on your priorities before you start shopping. You can always look for everything on both lists, but when you have to make a hard choice it’s nice to already have your important decisions made.

Let me leave you with this last and very important tip. One thing you should always do with each plane you are looking at buying is find out if there is any upgrades or mods that are almost mandatory. I’m currently looking for a plane for a customer that makes a great example.

I’m looking for a Citation Excel for them, and I want to find them the best plane in the world. And in the range of years they’re wanting to buy, there was an option for an externally serviceable lav. 

Now, I am going to tell you this should have never even been an option, and they actually changed it later on, because if you don’t have this option, you have to service the lave from inside the plane. Meaning you have to drag everything through the cabin of the plane, and that can also lead to unpleasant smells and even some dripping, if I can put it gently, and that is just gross.

So when buying a plane make sure you know if there is anything in particular for that make, model, and year you really want to be looking for.

In my next report we're going to cover setting a budget and understanding the trade difference.  

So that’s it for this report, thank you so much for joining me on this fifth step in my newest series of reports called, 9 Steps to a Successful Sale or Purchase of your plane. This is Jake Huling with Aircraft Sales Advisor, and I look forward to seeing you on the next one.

No comments:

Post a Comment