Insurability and future market values?

[howard.edson]

Hi. I live in the Seattle area, am actively in the market for my first plane, very interested in the M20F, or possibly a J/E/C/D.

I am 50 years old, have ~150h total time, close to completing IFR, planning to continue training complex and then commercial. No incidents, deviations, medical or other special considerations I can think of. I know from looking into a partnership on a J recently that insurance will be expensive, somewhat less so after I’m IFR and built some retractable time.

My question is around how the insurability of vintage Mooneys (perhaps retractables generally) is changing, and how that might affect their market values over the next 5-10 years? Part of how I’m convincing myself to spend up to $100K on an airplane is that I want to believe the value will be there down the road when I sell it.

How is this community thinking about that?

 

[carusoam]

Welcome aboard Howard!

We have some good news to share...

1) The world will change so much by that time, there will be other things to worry about...

2) The costs of operating an airplane, make the small changes in value relatively small...

3) Once you have enjoyed flying a Mooney for a decade, the total costs are big, but totally worth it...

4) You are still decades away from the burden of age related insurance expenses...

5) Just because insurance is increasing for the old guys, doesn’t mean you can’t sell the plane to a younger guy...

6) The overall change in insurance costs for everybody, is in the annoyance category... it is up this year... next year can be different... none of it will make any sense...

7) We have Parker that can explain insurance details for you if you are looking to get insurance for a Mooney...

I guess it all depends on what you are going to use your plane for...

note: for reference, I am in my third decade of Mooney ownership...  Jump in, the air is fine!

PP thoughts only not a seer of the future...

Best regards,

-a-

[MIm20c]

Your best option to keep costs down is to join a healthy partnership.  If you plan on flying and spending a lot the value of the aircraft in 10 years will not matter. It’s the individuals that fly very little who are worried about the fixed cost and future aircraft value. 
 

Having said that I’ve not put the hours on my C over the past few years I have wanted to.  Planning on liability only next year to help keep my fixed costs down on that aircraft. I fully expect the insurance rates to double over the next 5 years and we may find more individuals switching over to combat those rising costs. 

[Ragsf15e]

There’s a lot to this discussion, but one thing to try to wrap your head around... your purchase price and future sale price will be much less than your yearly cost after just a few years.  Buy the $100k airplane, spend $20k/year for 10 years.  Sell for $120k.  You’re down $80k plus inflation.  It has to be enjoyable because it’s definitely expensive. 

No, they don’t cost $20k/year every year, but at some point you’ll do $30k avionics or $40k engine.  You will have years at $10k for 100 hours, and you’ll have years at $40k for 50 hours.  It’ll average out in the $15-$20k per year ballpark.  Maybe more for your insurance as a non ifr pilot and for a hangar on the west side.  I have an F in Spokane and my hangar is cheap compared to what you guys have.

[Yetti]

Purchase price is not the expensive part of owning a plane.  Maintenance and upgrades are.  Toys are not financial investments.

[gsxrpilot]

You're actually asking for an opinion on whether putting a $100K bet on Red will pay out when the wheel is spun a few years from now. Who knows...

But here are a few factors to consider...

Yes, insurance is expensive but this entire hobby is expensive and it hasn't deterred any of us. In this game, if you have to ask the price, you can't afford to play.

The price of entry is the cheap part. It's everything else that gets you.

The fleet of good Mooneys shrinks every year thus raising the value of the good ones still flying. 

M20J's are going up in value faster than any other Mooney model.

It's a bit of a vicious circle.

• Pilots wreck Mooneys
  • Insurance prices go up
    • Pool of possible owners shrinks - lower demand
  • Size of Mooney fleet shrinks
    • Mooneys available to purchase reduced - lower supply

[MikeOH]

Personally, I think insurance costs will continue to rise, but the value of a Mooney won't have anything to do with that cost increase.

Sorry, but if you are basing even part of your purchase decision on the value increasing...you should NOT buy.  That sounds too much like you believe buying a plane is an investment; it is 100% NOT an investment!  A partnership might well be the best way to test whether full ownership is for you.

The planes we own and discuss here are mostly for our own enjoyment; some may be a business tool for transportation and have tax advantages.  But, even so, I doubt many of those business people view the plane as an investment as much as a depreciable tool that they enjoy using.

Early on I realized I was buying an EXPENSIVE toy.  As soon as I realized that I could afford it, l no longer felt any need to RATIONALIZE ownership: it's a HOBBY I very much enjoy...in the end that's all that matters to me.

YMMV

[Tim Jodice]

I agree with all of the posts. Fly it frequently and the purchase price is like background noise.

[gsxrpilot]

4 minutes ago, MikeOH said:

Sorry, but if you are basing even part of your purchase decision on the value increasing...you should NOT buy.  That sounds too much like you believe buying a plane is an investment; it is 100% NOT an investment!

Very true and good advice.

Having said that, if you buy a 201 specifically, but it can be applied to any mid or short body Mooney, if you maintain the plane properly, keep it up to date, and fly it regularly, you will get your purchase price back when you sell it. You probably won't get much if any back for the money spent to do all the above. But you'll get your purchase price back and probably a little bit more.

[PT20J]

An airplane is a depreciating asset, just like an automobile. It requires a lot of ongoing expense for maintenance, inspections,  insurance, hangar/tiedown, etc. What you get for it when you sell it is strictly a matter of supply and demand rather than any intrinsic value.

One theme you find on MS is the high cost of parts to maintain the airplane. But Richard Collins used to note that the cost of maintaining an airplane is more tied to the cost of a new airplane than a used one. A $1000 part for a $750,000 airplane doesn’t seem as outrageous as the same part that you might need for a plane worth $100,000.

There are lots of good reasons to own an airplane. Except in rare cases, they just aren’t financial.

Skip

[0TreeLemur]

Nobody buys an airplane to save money.   We buy them to save time.   Going by the equation:

time=money

Maybe we do save money.  But boy, does it cost a lot!

[Tim Jodice]

3 hours ago, 0TreeLemur said:

Nobody buys an airplane to save money.   We buy them to save time.   Going by the equation:

time=money

Maybe we do save money.  But boy, does it cost a lot!

They are magic carpets! They make the impossible possible! 

[kortopates]

As stated elegantly above, an airplane is toy. Buy it because its going to bring you a lot of enjoyment and you have the resources or partners to cover the larger cost of operating and maintaining it. Purchase cost is only the cost of admission, the annual flying budget will quickly exceed the initial purchase cost. Which is one of the best arguments to buy as much airplane as you can afford, assuming your serious about flying, because  subsequent upgrades will cost a lot more to fund new later than buy used now. 

[gsxrpilot]

4 minutes ago, kortopates said:

Which is one of the best arguments to buy as much airplane as you can afford, assuming your serious about flying

Truth!

My first Mooney was an M20C. A couple of years later I'd worked out that I could fly a 252 for the same OpEx. The CapEx was about 2.5x more. But the OpEx has been the same. (It's actually a little cheaper on fuel to fly the 252 rather than the M20C) And so since the true cost is in the OpEx, why not fly a 252?

[PT20J]

When I was contemplating purchasing my first airplane, a good friend and owner of a really nice TR182 told me that the best part of ownership is that the flying is free.

"Free?", I asked.

"Yeah", he replied. "It costs so much to hangar and insure and inspect and maintain the thing that the gas and oil to go fly for an hour is essentially free."

Richard Bach once wrote that he wanted to buy a certain airplane but was struggling to justify the cost. But then he realized that he really wanted a twin and that burned a lot more gas and had two engines to maintain. So by not buying the twin, he reasoned he was saving enough on gas and maintenance to afford the plane he was considering. And, he figured, if he ever ran out of that money, he'd not buy a Learjet and that should keep him going indefinitely.

Skip

[howard.edson]

Thanks, all, I appreciate the thoughtful responses and will let you know when I become an owner (I see it more as a when than an if). I'm ready for the ~$20K/yr ongoing costs of ownership, and I see how quickly that will end up exceeding my purchase price.

I guess I should have put more emphasis in my question on the effect of insurance specifically on Mooney market values. If at some point insurance premiums increase to, say, 10x today's levels, or worse, people can't get insurance at all, who will buy these planes? How likely this that to become a problem?

[PT20J]

57 minutes ago, howard.edson said:

Thanks, all, I appreciate the thoughtful responses and will let you know when I become an owner (I see it more as a when than an if). I'm ready for the ~$20K/yr ongoing costs of ownership, and I see how quickly that will end up exceeding my purchase price.

I guess I should have put more emphasis in my question on the effect of insurance specifically on Mooney market values. If at some point insurance premiums increase to, say, 10x today's levels, or worse, people can't get insurance at all, who will buy these planes? How likely this that to become a problem?

Pretty unlikely. Insurance costs seem to run in cycles like most economic measures. And, increases and decreases will hit the entire market. So if your question is: Will insurance become so expensive that no one buys small airplanes any longer?, then historically, that hasn't happened. If your question is: Will Mooneys be singularly disadvantaged by insurance costs relative to competitive models? then I don't believe history has shown that to be the case either.

Skip

[carusoam]

Anyone want to guess Howard’s decade of birth?

1) If you were born in the 50s... fresh out out of the big war... heading into a few more... you would sit on the fence wondering what will happen next.

2) Born in the 60s... love was everywhere, flowers in the hair... airplanes rolling out of factories by the thousands... interest rates were near 6%... and race riots were the norm..

3) By the 70s... inflation was wiping out your savings... gas lines ran around the block... cars only lasted five years... interest rates were near 16%... Lay-offs were announced on the nightly news.

4) 80s... fuel injection, computer controls, and equilength air intakes were in... mileage was up, inflation was controlled... horizontal drilling was being invented... Black Friday happened...

5) Born in the 90s, you got named a millennial... everything met expectations... you probably have a trophy just for playing... like a pandemic, fear of Y2K, was all encompassing, for an uncomfortable amount of time... you knew OJ for his off the field performance... and not the Avis commercials...  housing costs were rising so fast you feared not owning a home...

6) Born after y2k... and you have enough money to purchase a plane... you are not afraid of how much insurance is going to cost... you are more concerned about what the total addressable market is for your next product release...  You went big, because you weren’t going home...

 

Mooney owners are all about making good Plan As...

Successful long term Mooney owners are pretty good about making Plan Bs, too... Bs get used often...

 

Things are always going to change... not all will be good changes... not all will be bad...

Use your fear to your advantage...

If you fear insurance rates rising... how will you handle it?  When will you hit the eject...?

 

My primary fear as a new owner of a Mooney was engine OH... 

Ultimately, I needed a cylinder OH... right in the first year of ownership... lucky me! 

 

So...

We covered wars, fuel shortages, uncontrolled inflation...

We have seen the Great Recession, and the Covid pandemic...

Its all about perspective...

 

Now...

We have seen the wide spread use of technology to avoid running out of gas, and accidentally flying VFR into IMC... some Mooneys even have airbag seat belts.... and color screens with depictions of weather and traffic... right in the cockpit...

Interest rates are currently at an all time low... and headed higher...

Looking forwards...

Howard has a lot of homework to do...

Finding the right Mooney for him, while putting all the plan As and Bs together....

There hasn’t been a better time to own a pre-flown Mooney before... than today.

So many people are buying their first Mooney... good ones hit the market and are sold within days...

If still on the fence, reviewing Plan A and Plan B... maybe this isn’t the right time for you...

There are so many humps to get over in life... not everyone is on the same path...

 

notes...

Past performance is no indication of future performance...

All purchases can lead to total losses in the future... like any car, house, boat, or stock...

Buying a machine that doesn’t produce income, is not a financial investment...

 

It is a tool, that allows the pilot... to bridge time and distance.

The Mooney is a perfect tool for that....

Go Mooney!

PP thoughts only... not a finance guy... my OpEx costs for my M20C were very similar to my M20R... in total AMUs per year...

The biggest difference... the nicer plane got housed indoors...

Best regards,

-a-

[Jim Peace]

23 hours ago, PT20J said:

An airplane is a depreciating asset,

I think you mean depreciating liability

[howard.edson]

Thanks again, everyone. It's fantastic how active this forum is. I look forward to joining the community in a more official way soon!

[carusoam]

It’s not active enough, Howard!

Hang out here awhile... you will be supplying some good experience to the next new MSer...

Best regards,

-a-

[RobertGary1]

On 3/6/2021 at 3:44 PM, PT20J said:

An airplane is a depreciating asset, just like an automobile.

I don't think that is true. Don't think I've ever sold a plane for less than I paid for it, usually much more. Now maintenance is another issue.

[RobertGary1]

On 3/7/2021 at 1:32 PM, carusoam said:

 

 

My primary fear as a new owner of a Mooney was engine OH... 

 

 

Turns out that is not at all the most expensive thing that may happen. I had a low time factory new engine come apart in flight. When you have no usable core and then also need to overhaul prop, gov, etc due to metal fragments you're looking at 3 times what you thought an OH would cost. Not to mention it may not happen near home.

 

-Robert

[PT20J]

11 minutes ago, RobertGary1 said:

I don't think that is true. Don't think I've ever sold a plane for less than I paid for it, usually much more. Now maintenance is another issue.

According to Vref, my M20J was worth $194,000 when it was new (in 1994 dollars) and is worth now (with probably a modest $30K in upgrades) around $154,000. 

The reason you can sell a used airplane for more than you paid for it is a result of supply and demand and perhaps not fully accounting for upgrades and inflation. 

Skip

[carusoam]

14 minutes ago, RobertGary1 said:

Turns out that is not at all the most expensive thing that may happen. I had a low time factory new engine come apart in flight. When you have no usable core and then also need to overhaul prop, gov, etc due to metal fragments you're looking at 3 times what you thought an OH would cost. Not to mention it may not happen near home.

 

-Robert

My plan as a new owner was intentionally short sighted...

The lumps I could afford to take were very small...

an engine OH would have caused selling the plane as is...

So if it were a worse case like the cam and crank got damaged... 

The result would be the same...

The good news...  my M20C lasted a decade... between buying and selling 10years later... my capital cost was an amu for each year of ownership...

Tie down, insurance, fuel used... all cost more... each year.

Sure... there are all kinds of cases that can be financial crummy... Lycoming ran through a bunch of bad cranks... a decade ago...  and cams have been known to self destruct...

But, these aren’t the norm for everyone...

Select your worst case that will have you sitting on the sidelines... then decide if a partnership would be better option...

My next plane had the same plan... the budget could afford one OH...

 

PP thoughts about risk management and airplane ownership... not a finance guy...

Best regards,

-a-