Steve Varsano explains jet depreciation: they lose about 40% of value in five years, then drop another $3-4 million when the manufacturer's warranty expires and $300,000 annual maintenance costs kick in. The sweet spot for selling is before these post-warranty expenses hit.
So, what's kind of the sweet spot in terms of how old the jet is, where someone else is taking the depreciation and the big hit for you, but you're not going to be stuck with something that no one wants in 5, 10 years?
No, it's a great question. Pre-COVID, because the game changed during COVID these are depreciating assets. They go down in price every single year. But in the last 2 years, they went up, which is an anomaly that was never seen in the history of the earth. Bicycles, motorcycles, everything. But now, it's starting to come back down, and we probably, unless we have another pandemic or something, we're not going to see that happen again. So, normally, the first 5, 5 years of an airplane's age, you probably lose about 40% of the airplane value. And the warranty expires after 5 years. But to give you an example, that airplane might drop after 5 years old because it doesn't have the warranty. It's really a stupid reason for it, because let's say the difference in price might be $3 or $4 million. Instead of $25, it's $20. When you come off the warranty, you say, okay, you're going to add $300,000 a year for maintenance that was not going to be covered on warranty.
So what?
You're going to save $5 million on the purchase price? Who cares if you're paying $300,000 a year for maintenance? So,
