WIX Archives
Depreciation
Posted by bdk on Thu Oct 24, 2002 03:38:57 PM
In reply top Re: I´m beginning to understand ...... posted by PeterA on Thu Oct 24, 2002 07:50:40 AM
I was half joking about depreciation, but you don't get many hours out of a Merlin between overhauls ($$$$). In addition, a new Mustang owner may want to strip off that $30k paint job for one more to his own liking.
Also, a freshly restored aircraft out of a shop sells for (or is valued at) retail prices (i.e you pay retail labor rates to the restoration facility), whereas the established owner sells at wholesale (this is how Mark Clark and other brokers stay in business, just as a realtor does).
I think that the economic markets have more to do with it than anything. This was especially noticeable in the collector's cars and housing markets of the early to mid 1990's when values plummeted. Now, ten years later, prices are once again at a peak. Now the economy is approaching a recession (depending who you talk to). Obviously all the "dot com" millionaires are out of the market, significantly reducing the demand for lots of high priced playthings over the past few years. Those whose fortunes are based on stock prices are suffering as well (you should see my retirement account...).
The restoration projects of the past were much simpler (cheaper to restore) as well. When I last was paid to do it (1985- yikes!), a Mustang project was more an IRAN (disassemble, strip and repaint- fix what was broken) with maybe a skin or three needing replacement on the wings or fuselage, usually due to hangar rash rather than corrosion. Longerons were seldom replaced (they were just becoming available), it was cheaper to find a good fuselage.
: Christer
: Supply and demand. Too much resource chasing unsufficient
: business. It is not just a problem for Spitfires.
: The days of 'hours and materials' contracts are long gone
: for all but the few.
: If you submit a justified realistic quotation you will inv
: ariably be undercut. It is a delicate area but the skill i
: s to negotiate an advance to a decision point about 5% int
: o the project to include a full evaluation study, all part
: ies to feel happy, and then move forward or terminate on b
: oth sides as appropriate.
: I see guys struggling for token wages to support extended
: fixed price contracts for billionaires. That cannot be rig
: ht.
: You ask why do owners sell under cost. Who says so? Who ad
: mits to getting the numbers wrong? Personal circumstances
: would usually dictate this be it personal finance, busines
: s distress, loss of interest or to fund something else.
: In my experience depreciation is just not a factor if thes
: e aircraft are being operated and 'wintered' professionall
: y.
: Peter
:
: : Well, I understand that an estimate never is spot on and
: t
: : hat there are a lot of "unforeseeables".
: :
: : With some experience it should be possible to take that
: in
: : to account. Isn?t there some ISO standard for the purpos
: e
: : of better quotations?
: :
: : It doesn?t explain why owners sell below cost either.
: : Brandons depreciation-"theory" due to hours flown is the
: c
: : losest so far.
: :
: : Christer