Aircraft are still a great bargain - new or used

By Adam Hunt
New and used aircraft continue to be a great bargain.
After more than a decade of light aircraft gaining 10-12% in value year over year in the 1990s the trend has reversed itself in the last two years.
The culprit in the loss of aircraft values has not been lack of market demand.
In fact the number of aircraft registered in Canada is at an all-time high in 2005 and continues to climb briskly.
The lower prices for new and used aircraft are solely due to the plummeting US dollar.
After reaching a high point of $1.62 against the Canadian dollar in 2003 the US dollar has fallen to as low as $1.16 in October 2005.
Some Canadian bank economists are predicting a “par” dollar within the next 12-24 months.
US monetary and foreign policy is driving the US dollar to low levels of international confidence and the result is low demand for US dollars and high demand for stronger currencies, like the Canadian dollar.
The simple fact is with 90% of the market for new and used aircraft in North America being the USA, aircraft prices are set in US dollars on both sides of the border.
You can’t sell aircraft for more money in Canada because it is easy to import aircraft from the USA and that is where people will shop if they have to. This means aircraft values are the same across the border.
Most aircraft in the world are built in the USA, even Canadian made aircraft are built from US aluminium and US hardware.
It is petty obvious the strength or weakness of the US dollar drives aircraft values around the world.
This also means that while Canadian aircraft have all fallen in value 30% in the last two years, Americans have seen very little change in value in their aircraft.
What does this mean in practical terms for the average COPA member?
It means this is a great time to be looking to buy an aircraft – new or used.
Some examples: a used 1977 model Cessna 172N with average paint, avionics and interior was worth about $84,200 Cdn two years ago. Due the US dollar situation, that same aircraft is now worth about $59,100 Cdn.
New aircraft have become a bargain for the same reason. At the peak in 2003 an average factory new 2003 Cirrus SR22 cost $498,100 Cdn. Even though the 2005 model has increased in price in US dollars by $78,300 over the 2003 model a Canadian can buy a factory new Cirrus SR22 for $447,600 Cdn today.
The US dollar effect also means parts from US manufacturers are 30% cheaper than they were two years ago.
Since hull values have plummeted, Canadians can now insure their aircraft for lower hull rate premiums - saving even more money. These factors add up to a good time to buy and own an aircraft.
Of course the converse is also true – it is a bad time to sell an airplane if you bought it when the US dollar was high. If you bought an aircraft two years ago and are selling it today it will command 30% less than you paid for it – even if the engine hours and aircraft condition are the same.
This factor has not reduced the number of Canadian aircraft being advertised for sale, but it does account for the fact that some Canadian aircraft sellers are asking prices that are far too high in the current market.
The solution many buyers have resorted to is buying used aircraft in the USA and TC statistics show that Canadians are importing US aircraft in record numbers.
Close to 700 aircraft have been imported into Canada in the past year, almost all of them from the USA.
Because US aircraft sellers have not seen much change in value in their aircraft they are unaware that the strong Canadian dollar has made their aircraft a bargain to Canadian buyers.
The outlook from the leading economists is for further weakness in the US dollar and continued low aircraft prices, less expensive parts and hull insurance as a result.