Setting a budget and understanding the trade difference:
Hello, Jake Huling here with Aircraft Sales Advisor. I’d
like to welcome you to the sixth video report in a new series called, 9 Steps
to a Successful Sale or Purchase of Your Plane.
In the last report we covered one of the more confusing factors when determining a plane's value, and that is, aftermarket upgrades. We looked at upgrades from
three different perspectives.
One, 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 type of upgrades you should be looking
for, and how much you should pay for them.
In today’s report we’re going to cover budgets, realistic
expectations, and the three most common mistakes sellers and buyers make in
this area.
And in addition to that, we're going to talk about the importance of
keeping your eye on the trade difference, when both selling and buying a plane.
And what in the world a build plane is?
So let’s get right to it.
Setting your budget:
Two of most common and potentially challenging questions
when setting a budget are:
One, how much of what we want and need in a plane,
can we get with our current budget?
And two, how much of what we're hoping to
get for our current plane is realistic? If that sounds at all familiar, you are
not alone.
These two very common questions both have very similar answers.
So let’s start by taking a look at the three most common
mistakes sellers and buyers make in this area.
· #1 is What
I originally paid for my plane.
Now stay with me, because this one gets a
lot of owners in trouble and I'll give you an example of how it happens.
Let’s
say an owner paid 5 million for their plane when they bought it used. It’s now
three to five years old and they would like to get close to what they
originally paid for it. After all, a new one costs 7 million and mine is in excellent
condition and the paint and interior still look great. So shouldn't I be able
to get at least close to what I paid for it?
And I can honestly understand
their thinking, certainly no one wants to lose money.
But here’s the thing: There are a ton of
factors that come into play here, condition is one of them, and so is how much
time you've put on the engines and airframe, how many years you've had the
plane, if you've added any upgrades during that time, and the biggest one is: what the market is currently doing.
The good news is I do cover all of these
topics in previous reports, and I'll make sure to add links to them after the
report in both the video and text so you can check them out, because I cannot
stress enough how important accurate and realistic expectations are in order
to have a successful outcome with the sale of your plane and purchase of your
next one.
Otherwise you end up going down a road that leads to frustration and
disappointment.
· #2, What
I need to sell my plane for.
Another way I see owners deciding on the
sale price for their current plane is by basing it on the cost of the next one
they want to buy.
They'll take what they believe the next plane will cost,
subtract the additional amount they are willing to pay above the sale price of
their current plane (which is the trade difference, and we’ll get to in a
moment), and whatever that amount turns out to be, is the sale price they want
to set for their current plane.
Now, it might surprise you to know that
this way can work if its done properly. And keeping an eye on the trade difference is a way you can make up
for the sale price of your plane being lower than what you had hoped.
If the
trade difference is greater than your budget, or what you'd like to spend, you can
make that up by finding a plane (almost always it ends up being an off market plane) that you can buy for a wholesale number instead of retail price to make up some
of the difference.
For this approach to be a success, we need to keep our eye
on the overall transaction; how much you will have paid out after both the sale
of your current plane and the purchase of you next one.
Which leads us to the third
most common mistake buyers and sellers make.
· #3, What my
next plane will cost.
Here’s how a lot of buyers decide what
their next plane will cost and what their current plane is worth. They'll look
to one of the more popular listing sites like Controller for example, to see
what planes are selling for.
And that’s the mistake; the prices you see on
those sites are not what the planes are actually selling for. In fact there are
several things you should always remember about these sites.
1- The listed price is almost always higher than what the
market will support and even what the seller would actually take for their
plane. Which is great news if you're buying, but can be very disappointing when you're selling.
Especially if this was the only
source that was used to determine the value of your current plane.
2- It’s also important to know and remember, these sites are not the only place you can find a plane
to purchase. An off market plane, like we talked about earlier, that isn't listed on any of the sales sites, can
often be a much better option.
You or your broker get to work directly with
the owner instead of through an additional broker. It can be faster, less
expensive, and it can help shrink the important trade difference down to fit within
your budget.
3- Is what I call a build plane. This is usually an excellent
option if you are looking for a plane with many upgrades, especially upgraded
engines.
But this is a plane you will not
find on any these listing sites. In fact, the build plane doesn't actually
exist... yet.
What do I mean?
Well, this is something I do for clients and
customers, where I look for a plane with stock engines that are as close to
their overhaul times as possible, if not completely run out.
Then we change out
the engines with an upgraded version, new paint and interior if that’s
important or needed, and any other upgrades they might want for performance and
entertainment.
The result is a brand new looking, high performance custom plane
that fits your tastes, wants, and needs, and saved you a bunch of money!
Lastly let me leave
you with this.
It’s very natural for us as humans to look at each of these
areas separately rather than as a whole. And we tend to focus on that one
problem or challenge that’s right in front of our faces and that, of course,
puts us in danger of missing the bigger picture.
When going through this
process it’s so important to look at the end result in order to have complete success.
If you sell for a good price but buy too high, you go over budget. And likewise,
if you are unable to sell your plane for the price you were hoping, then you’re
not able to get the next one that you really want.
So my advice to you is always look at this as a whole, and
first decide if you want or need any extra help.
If want to do this on your own be honest with yourself and
make sure you have the extra time that’s needed to have a successful outcome: get
your plane sold for the top of what the market will support, find your next plane
for a wholesale price, and make sure it’s the best one in the world for you.
In my next report, we’re going to take a look at the market,
and I am going to show you how to find the three most important pieces of information
you will need to determine the value of your current plane, and to find out
what your next plane will really cost.
So that’s it for this report, thank you so much for joining
me on this sixth 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 really look forward to seeing you on the next one.
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