Last month, David Wyndham looked at timing an aircraft purchase as it relates to large business cycles such as the recession of 2008-2009. This month, he examines what impact the introduction of a new model with performance or options superior to the current model has on prices…
As with last month, we reference the selling history of three popular business aircraft using data published in Vref, an industry standard. These included a 1992 model Beech King Air B200; a 1993 model Cessna Citation Jet 525; and a 1992 model Dassault Falcon 900B.
King Air 200-Series
Referencing Tables A and B (depicting the King Air 200-Series), the King Air B200 was replaced by the King Air B200GT in 2008. The King Air 250, meanwhile, was introduced in 2011. These were evolutionary models with updated engines and more advanced avionics.
The selling price of the new model variant of the King Air B200 did not increase substantially over the predecessor model. The King Air B200GT was introduced just as the recession unfolded, so any downward effects on the selling price of the 1992 B200 are more likely due to overall economic conditions.
When, in 2011 the model 250 was introduced with a new price that was marginally higher than the B200GT, the model had no effect on the selling price of the 1992 King Air B200. Its selling price remained stable at $1.55m for about two years (2010-2012).
Citation 525 CJ-Series
The CitationJet 525 begat the CJ1 525 in 2000 along with a larger variant, the CJ2 525A (see Table C). Changes incorporated in the CJ1 were evolutionary, while the CJ2 offered buyers a slightly larger aircraft with more range. No significant drops in model 525 prices resulted from the introduction of the CJ1 or CJ2 series.
The Dassault Falcon 900 has developed into several refined variants during its many years of production. Per Table D, in 1996 the Falcon 900EX was a significant update with a completely new avionics system and updated engines. Both the Falcon 900B and 900EX were sold in 1996 with about a $2.5m price difference.
In 2007, Dassault introduced the completely new Falcon 7X (see Table E), a larger, faster, longer-range jet that was the new top-of-the-line Dassault offering. During the same timeframe, the Falcon 900 series would see further improvements as the Falcon 900LX. The price jump to the 7X was over $4m.
In 2007 the demand was high for all jet aircraft, and Dassault had a backlog of close to two years for the Falcon 7X. Late model Falcon 900Bs and 900EXs were holding their values.
Today the original $4m price difference between the 2007 Falcon 900EX and Falcon 7X has narrowed to about $2m - both being about 40% of their 2007 new price. The 1992 Falcon 900B, now aged 25, is about 20% of its 2007 selling price. That drop in valuation is more an indication of its age than other factors.
None of the three models we evaluated were significantly impacted by the addition of newer models in their series. The data for 2007 are unclear for the Falcons, however, as the demand for all business aircraft was high a decade ago. The strength of the used business jet market in 2007 would have been more a result of the economic conditions than any other factor.
As manufacturers introduce new model year aircraft, they look for ways to add value and justify the increase in asking prices beyond inflation. Any reduction in selling price of the used model due to the introduction of a newer model or model variant is likely countered by the new model’s increased list price.
Data do not support the premise that used aircraft prices suddenly drop to “bargain” status when a new variant of an existing model is introduced.
Next month we will conclude this series by examining the remaining factors that may impact used aircraft prices, such as end of the year discounts or model availability.