This was posted by Bert Garcia, firstname.lastname@example.org, on the Cessna 150-152 list. I thought it was a great post and highly relevant to the finances of flying and airplane ownership, so with his permission I am reposting it here._________________________________...The reason for putting my airplane on Aerotrader at AOPA VREF was to seewhat kind of response I would get. This exercise was in anticipation of mepurchasing another aircraft and trying to gauge how long it would take tosell my 150. Needless to say. 9-11 did have alot of people spooked andresponse was initially very slow. I turned down the opportunity to purchasethat other aircraft because I sensed a decline in the market. However,things have begun picking up again and I find myself behind the 8-ball notbeing able to really show it because the prop is still off the aircraft andI'm still doing some minor engine work to it.I would agree with your market analysis up to a point. What you've said istrue for assets that follow a normal depreciation curve; i.e., boats, cars,motor homes, fiber optic equipment, etc. It's well known that thedepreciation curve for these items is simply a downward slope thatterminates at $0 value after some given time. The curve is steeper for somethan others depending on the asset. However, a long term analysis of theaircraft market speaks for itself. The valuation (was depreciation) curveof a pre 90's aircraft is more of a checkmark or "Nike Swoop" with the valuefalling initially from new then climbing back up to its original price andthen past it. The reason for this is obvious. There continues to be aconstriction in the supply for small aircraft, hence their appreciation pasttheir original selling price. Even that 1967 F model 150 selling for $12Kto $15K is selling above it's original 1967 selling price (not adjusted forinflation).Cessna and other manufacturers know this and are taking advantage of it byselling their aircraft at extraordinarily high prices attempting to capturethe value in the back, upward, part of the valuation slope at the time ofnew product sale. They are pricing their aircraft high enough that it mayNEVER appreciate past its original selling price. This has two distinctbenefits for them. They keep the GA fleet small and the demand high, andthey increase overall profitability by selling 1000 airplanes at $150Krather than 2000 of the same airplane for $75K. Before 9-11, Cessna wasgetting $150K for a new 172 and Diamond was getting $100K for a two placeKatana. A local Raytheon manager who used to work in Wichita KS for Cessnahas often repeated to me that 172 airframes, while still mostly hand built,cost the company about $15K to fabricate and assemble. Even with productlitigation insurance costs attached to each airframe, Cessna can afford toprofitably sell these aircraft for almost half of what they are askingtoday.The effect on the used GA aircraft market was obvious. Thirty year oldairplanes became expensive again.Now with regards to current conditions, I think your argument about aircraftdepreciation is based on two short term assumptions. First, the currenteconomic instability (however gauged) does have a dampening effect on"recreational" capital expenditures (such as airplanes). Second, thecurrent FAA part 91 flight restrictions that have grounded certain aircraftare artificially depressing their value. After all, if an airplane can'tfly, what good is it, right? Combined I do believe these will have adampening effect on the valuation of small aircraft but only for the next 6months. The manufacturers are the real bench mark in this market. So longas Piper and Cessna can continue to command $150K or better for a four placeaircraft and companies like Diamond can get $100K for a two place, the usedmarket will continue to remain the only available source to fulfill currentdemand.Now a word about the current level of demand. Simply put, it hasn't changedsince 9-11. There are still the same number of GA pilots in the pool.While they may not be flying right now due to economic, weather or otherreasons, the fact remains that they are still out there and still veryinterested in flying. Add to this the fact that there are more pilots thatairplanes in the market to serve them. It's been that way for a very longtime. Otherwise a 1965 Cessna 150E would have gone the way of a 1965 DodgeDart. If the economy improves in time for the spring flying season,Feb/March/April, the pent up demand for recreational flying will explode!Pilots are people too and they'll want to put the worries of 9-11 and a softeconomy behind them by taking to the skies.In view of all of this, I have raised the price of my aircraft to $23,500.I've also cleared a line of credit in order to take advantage of a good dealon a 4 place that I came across a couple of days ago. Like you, I'mconstantly looking. There are people selling right now for various reasonsand they are experiencing a lower demand than a few months ago; hence thelower short term prcing. To me that singals opportunity for a smart barganhunter.I might end up being a two airplane owner for a while but I'm certain areliable trainer like a 150 in great shape will continue to command apremium when the flying season is reopened. After all, what other airplanecan you put car gas into or fly around on 100LL for less than 20 bucks anhour!You could say I'm going LONG on GA!Good Luck!Bert GarciaN11447
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