Where are all the buyers?

Interest rates are low. Banks are lending. Aircraft prices have dropped considerably. And yet, so few planes are selling. The aircraft market should look like a half price sale on shoes at your wife’s favorite mall. Instead, it looks like a ghost town.

Here are a few reasons why I see this happening and ways you can counteract it.
1. Some Buyers and Sellers are afraid to talk to their banks. Yes, captains of industry and self made leaders are not talking to the banks. Sellers may have to realize the market price for their plane is below what they owe. If they have a few conversations with their bank, they may find out the bank has a number in mind they would forgive. On the other side, Buyers are not getting pre qualified for loans and find out the plane they bid on is way out of their range.

SOLUTION: Pick up the phone and call you bank. Sellers, talk to a qualified broker and get real valuations on your aircraft. Wholesale and retail (though there may be little difference these days). Take these to your bank. If you need real offers in writing, have a broker put it out through their private channels and get those written offers. You can show the bank what your plane is really worth and see if they may work with you. If you do have your plane for sale, tell your broker to only bring offers that are cash only or have financing already in place. Too often an aircraft is tied up while a buyer tries to get financing. By the time he learns he can’t buy the plane, properly qualified buyers have already passed you by.

2. Waiting for the Shadow Inventory. Many buyers believe greatly exaggerated rumors that more planes are going to be available at repossessed prices. Or that their friend’s brother in law is about to take in a plane on trade that they will be able to get at below wholesale prices. This attitude has paralyzed a segment of the buying population.

SOLUTION: While it is very difficult to counteract perception, you have to understand the realities of the market and hold your ground. A broker who knows your specific market will know the truth about what is happening with other planes. This is not real estate where transactions are reported. In aviation, one must rely on good relations with other brokers. Also, let the buyer know that you are happy some other plane sold for that incredibly low price because that means that the bottom is gone and reasonable buyers will still get good deals while those on the sideline will watch prices rise.

3. Waiting for the Bottom. Like the shadow inventory, so many buyers believe we have not seen the worst of the market and another huge drop is on the way. They argue that the seller ought to agree to their price right away or lose out. Sometimes they arrive with exaggerated stories of low prices on other planes to bolster their argument.

SOLUTION: In one way they are wrong – there is no way to predict the future of the market. In another, they are right – that any buyer with the ability to close should be taken seriously. Again, a knowledgeable broker with good relations between other brokers will know what planes really sold for and can provide actual comp figures that are not available to most people. Know the market, discuss this openly and often with your broker and give him or her the ability to lead the buyer in the right direction.

4. Buyers are afraid of losing on their investment as soon as they fly it away. So many are looking at planes as an investment – what can they sell it for tomorrow. If it is less than they pay for it, they feel cheated. So they want to be sure they are getting a “steal”. In fact, many buyers seem to be seeking out planes being represented by pilots or brokers who are not invested in that plane’s market just because they hope the person selling the plane will have no idea of its true value.

SOLUTION: Don’t get into price wars as a first tactic when selling. Price is only one of the four ingredients to a sale (Price, Placement, Promotion, Product). Don’t abandon the other three. Market it to the best of your ability with complete well written spec sheet, beautiful well staged photos (maybe video) and placement in the right media. Make sure whoever is taking the calls on the plane is available 24 hours a day and has great knowledge of the market. Whoever is selling your plane is your shield keeping you from scams, bottom feeders, and time wasters. Your rep should be prepared for any argument against your plane or its price. Sell this as a business tool, a personal toy and a symbol of success. Selling it on price alone ignores other opportunities.

5. Nobody wants to get “taken”. Trades are a common question today – “Will you take my King Air and $200,000 for your CJ1?” is one type of inquiry I get these days. While it might seem good on paper, and provides a way to transfer a loan into better terms, most trades fall apart because of trust. One or both parties may imagine that they are getting hoodwinked. So it rarely gets past the talking stages.

SOLUTION: Outright sales seem to make everyone feel more comfortable. But when a trade might be the best solution, don’t let fear get in the way. Bring both planes to a mutual field, meet each other, and really look over the planes. Take a good long day to do this. After this, each party needs to allow independent price valuations and mechanics tell them what the planes are worth. Only after this point should you talk price. If both parties arrive at the process knowing what their plane is worth (based on prior offers, valuations from vRef and BlueBook, etc) the meet and greet will solidify those numbers and give each side either a feeling of comfort or enhance the feeling they could get fleeced. Either way, you won’t know unless you arrive knowledgeable and with eyes wide open.

If it seems I have spent a lot of time arguing for the need to have a broker with you as you sell your aircraft, you are right. Just make sure your broker is not only a person you like and trust, but he or she has had experience selling the kind of play you have and that they also have a good enough reputation in the market that scam buyers and bottom feeders will stay away. And that reputable buyers and brokers will enjoy working with them.

We will all make it through this down period. Or is it a readjustment that has revealed a new reality in pricing? Either way, I hope some of these points help you when it comes time to readjust your aircraft inventory as either a buyer or seller.

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