Why new planes will never sell that much.

mmgreve wrote:

…I would still take a bet that you’ll get taxed on having access to your company car, …

Usually a percentage of private use of the total kilometers driven is negotiated with the tax office. The taxes on this are quite low compared to the real cost of the car or plane. That is a very complicated part of the already very complicated German tax laws (“geldwerter Vorteil”) and mastering that distinguishes the grown-ups from the boys

@adamfrisch
In the scenario you describe it would be the height of irresponsibility to buy a new plane. I could theoretically buy something new with cash, but consider my lowly Rallye a stretch, not because of the cash outlay but the monthly costs. Still, I know I can afford it. A new plane? No.

This sort of tax thing is highly country specific. Can’t do this in the UK, for example (many threads on that, too).

As regards new plane prices, I am sure we did this before a number of times. A decent IFR tourer for example has always cost about the same as a house (of say 3 bedrooms, with a lot of variation obviously), and this was true in 1960 as it is true today.

There are always people who have the money. Like that initial Cirrus Jet customer who bought 8 x SR22 in as many years, roughly. OK; he’s extreme, but plenty of people are paying $1M+ for a SEP with a turbo, TKS, an IR camera, and some other goodies.

At every price point there are customers. Some general observations can be made e.g. there is a limit to how much fancy stuff you could load into an SR22 and charge say $2M for it. At that price level people would go for pressurisation, which in turn drives other things which drive the size and price way up. Hence say the Grob 140 – a €2M unpressurised SET IFR tourer which nobody wanted.

The bonanza of the 1960s will never come back. Values and priorities have moved on. The business will trickle along – like the history of the windsurfing business from the 1970s

Mooney_Driver wrote:

But this will not generate the volume needed to slash costs.

That volume will never be met no matter how you look at it. Planes aren’t that much more expensive than boats, when thinking about the man hours needed to complete them. A boat is of course much more voluminous than an equally priced aircraft, more material, but it’s the man hours you pay for, along with the cost of low volume sales itself, which is a bit higher for aircraft due to even lower volume than for boats. The price of an outboard marine engine and an aircraft engine is remarkably similar for instance. This is rather strange considering Honda outboard engines also are used in cars which are sold in hundreds of thousands. They should be much cheaper.

It simply takes a whole lots of hours to build an aircraft. Traditionally, for homebuilt aircraft, the airframe kit is 1/3, the engine is 1/3 and the avionics is 1/3. For an RV-7, this amounts to approximately 60-80k US$. Then comes such things as paint (10-25k done professionally), “factory quality” leather interiors (20k ++, the sky is the limit), more advanced avionics (IFR, traffic systems, radar, 50?k and up to infinity).

You can indeed build a nice IFR RV for 60-80k, but adding “factory must have option”, this price will at least double and triple, just like that. Now we are at 200k easily. Then we want someone to build it for us. This takes one guy 1-2 years, and you have to pay for the tools used, the use of the shop and all extras. At least a doubling, so you end up somewhere between 400 and 500 k. Then you have to certify it (Europe mainland is allergic to things that aren’t certified, unlike Scandinavia ) The cost of certification is an unknown mystery black magic thing, but let’s say 25-35% of the initial price : total price is 500-700k.

What you end up with is a plane at 500-700k, that initially would do the exact same “mission” costing only 60-80 k and some hobby hours in the double car garage. This is the reality, almost a factor 10. It is perfectly doable to get a plane that outperforms anything certified out there (except TPs) at 60-80k, full IFR, fully legal and insured. Lots of people are doing it.

Why aren’t factories building the 60-80k version? It shouldn’t cost “more than” 150-250k. I have no idea (actually I do, have some ideas that is, but I leave it for now)

AdamFrisch wrote:

Seems like aircraft financing needs a completely new model if they want to shift more airplanes in the future. There are only so many people in the world who have $1 million laying around in cash for a new Cirrus.

I completely agree. The prices of new aircraft are mainly a sign of complete and utter failure by the light aircraft industry, nothing else. With modern production methods it should cost a fraction to build these aircraft, certainly not significantly more than a high-end car. There are no vast technological differences between these, both being powered by internal combustion engines. Of course cars can be made much heavier without reducing their performance, but that’s about it.

Of course nobody in the aviation industry is going to create a factory for aircraft like VW, GM, Toyota et al have for cars, because they don’t sell enough of them to justify such an investment. But this is kind of a circular argument, don’t you think?

I think that if you halved the prices of new planes, their sales would hardly change. The demand is limited by a cap on the desire of people to fly GA.

Peter wrote:

A decent IFR tourer for example has always cost about the same as a house (of say 3 bedrooms, with a lot of variation obviously), and this was true in 1960 as it is true today.

Only in the UK, where house price inflation is absurdly high. Against average income, the price of a new plane has increased greatly – and that’s what really counts.

The other edge to the sword is that the running costs of a new aircraft like an SR-22 are much greater than the running costs of its equivalent in the 1960s/1970s (let’s say something like a Bonanza). Back then you would build a single war chest of cash for an engine reserve. However, running an SR-22 is probably like flying a Trislander – you now need essentially three “engine reserves” – you need to build up not just the war chest for the eventual overhaul of the engine, but one for avionics (in another thread, a backlight cost £8000 to replace, and electroluminescent backlights probably only have a half-life of about 8 years – in fact I wouldn’t be surprised to see the single biggest expense go from being the engine to the avionics with aircraft with G1000s and the like) and of course with the Cirrus, the parachute.

Of course although houses have got greatly more expensive since the 1960s, their running costs haven’t suffered the same eyewatering levels of increases that have occurred for new aircraft.

alioth wrote:

Against average income, the price of a new plane has increased greatly – and that’s what really counts.

I think what really counts to me, now, it what I can buy with the money I have on hand. New-ness has no value to me in planes, and the reason factory built production volume is low today is that others feel the same way. I think right now is the golden age of value in buying planes.

As you astutely point out, older planes are in principle less trouble than new ones, as well as costing a reasonable price in 2017: in addition to flat panel obsolescence issues, there’s generally no IFR certification issue, no mandatory periodic maintenance written into the limitations section of the MM, no MEL issues… and often more.

MedEwok wrote:

I completely agree. The prices of new aircraft are mainly a sign of complete and utter failure by the light aircraft industry, nothing else. With modern production methods it should cost a fraction to build these aircraft, certainly not significantly more than a high-end car. There are no vast technological differences between these, both being powered by internal combustion engines. Of course cars can be made much heavier without reducing their performance, but that’s about it.

So go and start an aircraft manufacturing company @MedEwok! Sounds like nobody has realized now easy it is so the market is wide open for you

AdamFrisch wrote:

Ask yourself this: Let’s say there was a leasing or owning option that would get you a Cirrus SF50 for $2000/month, eschew debt-to-income ratio, put very little down – how many would go for it? I think quite a lot.

Lending with only the object as collateral works when the object has a very predictable depreciation and is easily marketable. A 2 year old Porsche is something you can calculate. Much harder for low volume GA.

Your approach to taking a loan to fund a toy/hobby is very un-European. That’s the last thing 99% of the people here would do. In the US it might be different and there are major tax subsidies for companies buying aircraft. These incentives seem to come and go.

I agree that even at half of today’s prices, GA aircraft sales wouldn’t increase significantly. There is simply not a lot of demand. GA airplanes below let’s say CJ2 are mostly toys and have become less fashionable as interests shift.