Vref and Aircraft Bluebook, the two primary aircraft valuation services, are helpful when it comes time to figure the retail value of an airplane before buying or selling. For this article I’m going to focus on Vref since so many AOPA members use the “watered-down” Vref service at AOPA.com. Methodologies behind both are similar however. Not surprisingly, buyers tend to leave items off their valuation to drive the price of an airplane down while sellers will throw in everything but the kitchen sink to inflate the price. If you live in the real world let me show you how to correctly calculate a Vref value.
First, there are 3 important things you should know about “book” values:
1. They are only a place to start. In the end, unless a buyer and seller come to terms on price, it really doesn’t matter what the book value is. If you’re stuck on a book number then you’re either going to own your plane, or be looking for one, for a long while.
2. The numbers in the book are only as good as the data that’s fed into them. Aircraft brokers and dealers, WildBlue included, periodically report sales values to Vref and those values are used to adjust the pricing models on the next quarterly issue. Reading between the lines, it is therefore theoretically possible for a dealer who primarily sells one make or model to skew the data by falsely reporting values.
3. The information always lags the market. Since the data is released quarterly, the numbers could be as much as 3 months out of date. In a changing market, that could make the result completely unreliable.
When it comes time to actually calculate the book value, you must keep these things in mind:
1. Physical depreciation plays a part in every aircraft. In other words, virtually no upgrade to an aircraft will yield a 100% return on investment. Some items, like the cost of labor, add no value. Others, like specialty mods, may add some value but only to the right buyer. One of the biggest mistakes made is assigning value that can’t be justified.
2. Valuation services assign items to be included in the “base price” of each aircraft. These items are already calculated into the price of the airplane therefore you should not add additional value to any item that is already part of the base price. Conversely, if one of those items has been removed from the aircraft then the value of that item should also be removed.
3. Unless the or component is brand new, full retail value should never be credited to the bottom line. In fact, the instructions directly from Vref read:
“Rarely will an avionics upgrade add its full cost or nearly full cost to the value of the airplane. If the radio or radio package is new within the last several months, it can add 70% or 80% of its cost to aircraft value. Normally, most new radios retain about 40% to 60% of their new cost. In most cases, it is appropriate to add about 50% of the new cost to aircraft value. A 40% to 60% factor is appropriate in most cases. Most older radios do not have added value. State-of-the-art GPS/Comms retain 50% or more of their value for many years. However, a new ADF or DME would have no added value. Also, if a plane is expected to have a certain item, such as radar or autopilot in a twin, there would be no added value.”
4. The books assume everything is in working order. You get no brownie points for replacing an alternator, changing tires, or doing other routine or required maintenance.
Calculating a “book” value is part art, part science. Let me reiterate a previous comment – book values are a good place to start but are not the gospel truth. Take them with a grain of salt and question the any add on’s and deductions. After all, in the end, an airplane is only worth what a buyer and a seller are willing to settle on.