Typical glider depreciation?

What is a typical depreciation value for gliders that clubs/owners use
in accounting for the cost of gliders? Do you assume linear
depreciation?
(This is a difficult value to estimate, given the lack of easily
available data for second-hand glider prices throughout a reasonable
time span.)

On 8/7/2011 8:57 PM, David Reitter wrote:
What is a typical depreciation value for gliders that clubs/owners use
in accounting for the cost of gliders? Do you assume linear
depreciation?
(This is a difficult value to estimate, given the lack of easily
available data for second-hand glider prices throughout a reasonable
time span.)
It depends and the tax rules vary frequently, including some special
qualifiers. If a choice is available, selection might be based on state
personal property/tangible tax obligations and whatever implications
might be tied to disposal and recapture.

http://www.aviationattorneys.com/air...deductions.htm
http://www.advocatetax.com/depreciation/formDepSav.php

For the USA -- Gliders are aircraft and the IRS says that the
depreciation schedule for an aircraft is 5 years (and only 5 years).

The only way to depreciate it faster is by having your accountant take
advantage of special "bonus depreciations plans" that are sometimes
made available by the government.

If you feel that your glider will depreciate (to a zero value) over a
much longer period than the standard 5 years (as we all know is the
case), it is legal to start with the purchase value and establish a
"risidual value" at the end of the 5 years. The determination of this
residual value is up to you (and your accountant) as long as it is
based on some reality.

for example: $50,000 starting value (purchase price) - $30,000
risidual value = $20,000 in "accounting value" lost in 5 years.

Then your accountant can legally show $20,000 in depriciation over the
first 5 years ($4,000/year). At the beginning of the 6th year you
start over using the $30,000 "balance" as a starting point to reset
the calculation -- all $30,000 over years 6-10 or set up a new
residual value and keep going until all the value is depreciated.

You and your accountant would analyze both scenarios to determine
which method was the most "correct" for your particular glider and
your particular accounting situation. Obviously, your yearly tax
situation will be influenced by the depreciation method you choose.

Steve

Disclaimer -- the above is not accounting or legal advise. You
accountant should be consulted to ensure that your plan of action is
both legal and conforms to the "best accounting practices" that we
should all strive to achieve.

Assuming you're interested for valuation reasons, rather than US tax
ones...

I did some sums on the depreciation in real terms of an ASW20 over25
years, and got the answer of about 2.3% per annum.

This was based on finding an original 1984 price of $28,000 for an
ASW20C, and approximate asking prices in 2009 of $33,000, then
depreciating according to the retail price index (US, I think, though
I don't recall where I got that from).

Could do with some more data points though.

Paul

On Aug 10, 8:13*am, Paul Ruskin wrote:
Assuming you're interested for valuation reasons, rather than US tax
ones...

I did some sums on the depreciation in real terms of an ASW20 over25
years, and got the answer of about 2.3% per annum.

This was based on finding an original 1984 price of $28,000 for an
ASW20C, and approximate asking prices in 2009 of $33,000, then
depreciating according to the retail price index (US, I think, though
I don't recall where I got that from).

Could do with some more data points though.

Paul

Depreciation of the value of gliders - especially European built - has
been offset by the depreciation of the US dollar, which has dropped
from around 0.8 to the Euro to over 1.4. This has nearly doubled the
dollar cost of new gliders imported from Europe into the USA in the
past ten years. This depreciation of the dollar has led to much less
drop in value of gliders as they age in the US market.

Mike

That's a fair point Mike. Let's try and collect some data.

Would people be prepared to post what they paid for their gliders in
the past (Sterling, Euros, Dollars)? Further back the better. Then
we could get some idea of actual depreciation, and take account of
currency variations.

Paul


On Aug 10, 4:56*pm, Mike the Strike wrote:
On Aug 10, 8:13*am, Paul Ruskin wrote:

Assuming you're interested for valuation reasons, rather than US tax
ones...

I did some sums on the depreciation in real terms of an ASW20 over25
years, and got the answer of about 2.3% per annum.

This was based on finding an original 1984 price of $28,000 for an
ASW20C, and approximate asking prices in 2009 of $33,000, then
depreciating according to the retail price index (US, I think, though
I don't recall where I got that from).

Could do with some more data points though.

Paul

Depreciation of the value of gliders - especially European built - has
been offset by the depreciation of the US dollar, which has dropped
from around 0.8 to the Euro to over 1.4. *This has nearly doubled the
dollar cost of new gliders imported from Europe into the USA in the
past ten years. *This depreciation of the dollar has led to much less
drop in value of gliders as they age in the US market.

Mike

On 8/10/2011 11:38 PM, Paul Ruskin wrote:
That's a fair point Mike. Let's try and collect some data.

Would people be prepared to post what they paid for their gliders in
the past (Sterling, Euros, Dollars)? Further back the better. Then
we could get some idea of actual depreciation, and take account of
currency variations.

This is important: When you sell a glider, the price you get is not
determined in any way by what you paid for it. So, I'm not persuaded
that "depreciation" means anything in the very small glider market.

Gliders that were identical when new at the factory can be so very
different after 10 or 20 years for numerous reasons:

- damage history (major repairs to none)
- hours (20 hours a year to 250)
- finish (pristine to cracking)
- instruments (20 year old outdated stuff to the latest in everything)
- trailer (hangar queen to a contest pilot's 10,000 miles a year)

The popularity of particular models also greatly affects the value after
10 years, even if they are very similar in performance.

And this: because of the swings in the currency market, the owners of
two identical gliders bought only one or two years apart can have
significantly different depreciations, simply because of the value of
the dollar at the time of purchase.

Here's an observation: I've sold four gliders since I started soaring in
1975. Three of them *appreciated*, only one *depreciated*.

--
Eric Greenwell - Washington State, USA (change ".netto" to ".us" to
email me)

- "A Guide to Self-launching Sailplane Operation Mar/2004" Much of what
you need to know tinyurl.com/yfs7tnz

I think all that you've said is true Eric. None the less, with enough
data it would be possible to see some trends - rather like the car
guides that you can get (Parkers in the UK for example).

I've heard several people comment that they've sold gliders for more
than they paid. I don't know whether that remains the case after you
allow for inflation (probably will in some cases - as you mention
prices go up and down).

I also observe that it's possible to buy a then state of the art
glider from the 1960s for £5K, from the 1980s for £20K and a new one
will cost you £100K. OK, not like for like, but my suspicion is that
if you buy a new glider and keep it for a long time, it will
depreciate. I'm a little curious as to by how much. Hence the
request for data!

Paul

On 8/11/2011 11:58 AM, Paul Ruskin wrote:
I think all that you've said is true Eric. None the less, with enough

I also observe that it's possible to buy a then state of the art
glider from the 1960s for £5K, from the 1980s for £20K and a new one
will cost you £100K. OK, not like for like, but my suspicion is that
if you buy a new glider and keep it for a long time, it will
depreciate.

If you keep it for a short time, it will almost always depreciate. Keep
it for a long time, and it's a total guess about what will happen. If
your currency tanks, you'll be delighted with the amount you sell it
for, and you could even show it was a good investment; if the number of
soaring pilots continues to shrink, you'll be selling into a buyer's
market and the opposite will occur.

I'm a little curious as to by how much.

I just told you exactly what will happen: you will lose or gain money
when you sell, and there is no way to know which it will be 10 years
from now.

Hence the request for data!

You can't do it for the glider you end up buying - too many important
parameters that can not be predicted or controlled, and like the
investment people tell you "past performance does not guarantee future
results". If this is just a fun thing you like to do, have at it, but
don't even think about it if you want to own your own glider.

Instead, buy one you can afford, that you can fly safely and enjoyably,
fly the hell out it, and hope that A) prices are really high when you
want to get out of the sport; B) Prices are really low when you want to
get a different glider.

--
Eric Greenwell - Washington State, USA (change ".netto" to ".us" to
email me)
- "Transponders in Sailplanes - Feb/2010" also ADS-B, PCAS, Flarm
http://tinyurl.com/yb3xywl

All, thanks for your replies.

I should clarify that this is about depreciation for valuation and
price calculation in our club and not for tax purposes.

What I am trying to come up with is a tariff for our club gliders.
The goal is to charge enough in glider rental to maintain the assets
of the club. Conceivably, this would mean not just to keep a fleet in
the air, but to replace gliders as they age so we have reasonably
recent gliders to fly. Depreciation may be a major component. How do
other clubs deal with such issues?

(To give more of a background: The club in question currently has a
Schweizer 2-33 as training glider, and then a 1-26, a Pilatus B4 and a
Grob 102 Astir, and a Piper Super Cub. I think this is somewhat
typical for a number of smaller clubs in the US, and worth
discussing. While I love the club and enjoy flying there, you will
probably all agree with me that a reasonable forward-looking plan has
to include an update of the fleet. That is why I'd like to figure
out reasonable rental charges for those a/c, but also for potential
upgrades.)