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Aircraft are normally depreciating assets. We have calculated that the depreciation for a super mid-size aircraft adjusted for 2% annual inflation to be 5.8% per year. There is enough historical data to make this a valid assumption. The last five years the annualized inflation rate was 4.27%. This would change the real depreciation rate from 5.8% to 3.53%.What this means is that aircraft in terms of inflation adjusted numbers are not depreciating at their historic values. Thus, we see aircraft trading above what the historic models would have predicted. Perfectly what you would expect.Now let's take an example. A popular super mid-size aircraft sold new for $21,400,000 in 2022. The market with 2% inflation would suggest a price in 2026 of $16,850,000. However, if the 4.27% inflation rate is applied the market would suggest a number of about $18,530,000. However, if you look at actual sales numbers that price would put you in the 2018/2019 model years.What is going on to warrant this deviation from the expected market?This is a classic view of thinly traded markets. There is limited supply and the supply to replace with newer models is also restricted. The market is doing what markets do; they are balancing the supply and demand against market signals, not predictive models.We are told that asking prices do not make a market. I just listened to a good podcast on that very subject. But, when there are only a few transactions and they do not align to what the market would predict, what is the market value?I think there is a lesson here for buyers and sellers. The asking price is an expectation by the seller that may not have any real facts behind it. An offer might be based on predictive models and not be in touch with the reality of the market.Advice to buyers and sellers is not to just let that buyer's offer go into the waste bin. Buyers, do not be offended that the seller has higher expectations than the market would predict.Markets are made by willing buyers and willing sellers. They do not necessarily follow predictive models or historic models.The next item is if you are overpaying from the historical model, know that at some point in time when the market balances, you will have paid a premium. There is not anything wrong with that, just understand that it will eventually go away as supply and demand rebalance when more aircraft come on the market in later years.When it comes to buying a premium aircraft, buyers will often pay at the higher end of the market to get a highly desirable plane that meets their requirements. Buyers will often pay more for the same exact plane because they like the interior or exterior. There is nothing wrong with that. You just need to understand the next buyer may not care about the same things that drove you to that decision.While appraisals are to be in black and white, it is rarely the case in an aircraft transaction that everything is black and white. There is a whole bunch more gray in these valuations. But knowing the black and white helps you understand what you are paying for in that gray portion.Bottom line is that the market is the market. You can wish it was different, you can wish it was following the predictive model, and you can then wish you had the plane you wanted but lost because someone had a higher value for getting the plane now versus later.We would like markets to be like ones that have hundreds even thousands of transactions, but that is not the world we live in. Knowing where you stand in a normal market, then understanding what you are paying for to get what you want now is very helpful.On late model high demand aircraft with long backlogs, you will need to pay a premium. The premium is the amount that you finally say this is the maximum I am comfortable to get the plane now and the price the seller will accept. That is the market.About the AuthorMike McCracken is President and founder of Hawkeye Aircraft Acquisitions, a boutique aircraft acquisition consulting company formed in 2014 that serves individuals and businesses interested in buying a jet or private aircraft solution for their personal and corporate travel needs. He has over 36 years of business aviation experience, 28 with a major new aircraft manufacturer on the aircraft sell-side. In turning the table from selling to buying an aircraft, he is able to leverage his aircraft sales experience to provide a unique and valuable service to clients when acquiring an aircraft.Mike has developed several tools for helping people analyze aircraft options. He has a proprietary aircraft evaluation tool, developed two models for residual value probabilities, a maintenance and reliability tracking tool and a cost-benefit tool for illustrating time and money savings over the airlines. He is a current 7,000+ hour Airline Transport Pilot with three aircraft type ratings and the owner of a Cirrus.Mike McCracken is a native of Iowa and a graduate of the University of Iowa, who started his aviation career while he was a sophomore in college. He has been in aviation since 1976 and has flight instructed, flown night freight, charter and corporate aircraft.