Value of Used Starship

[tbeard1999]

Here's a chart that I devised for CT showing the payoff amount for starships and the value of used starships:

EDIT: Revised

[U]Year	 Balance 	 Value [/U]
1	 0.79169 	 0.98961 
2	 0.78303 	 0.97879 
3	 0.77403 	 0.96754 
4	 0.76467 	 0.95583 
5	 0.75492 	 0.94365 
6	 0.74478 	 0.93097 
7	 0.73423 	 0.91778 
8	 0.72325 	 0.90406 
9	 0.71182 	 0.88978 
10	 0.69993 	 0.87492 
11	 0.68756 	 0.85945 
12	 0.67469 	 0.84336 
13	 0.66130 	 0.82662 
14	 0.64736 	 0.80920 
15	 0.63286 	 0.79108 
16	 0.61777 	 0.77222 
17	 0.60207 	 0.75259 
18	 0.58574 	 0.73217 
19	 0.56874 	 0.71092 
20	 0.55105 	 0.68882 
21	 0.53265 	 0.66581 
22	 0.51350 	 0.64187 
23	 0.49357 	 0.61697 
24	 0.47284 	 0.60000 
25	 0.45127 	 0.58333 
26	 0.42882 	 0.56667 
27	 0.40546 	 0.55000 
28	 0.38115 	 0.53333 
29	 0.35587 	 0.51667 
30	 0.32955 	 0.50000 
31	 0.30217 	 0.48333 
32	 0.27368 	 0.46667 
33	 0.24403 	 0.45000 
34	 0.21319 	 0.43333 
35	 0.18109 	 0.41667 
36	 0.14769 	 0.40000 
37	 0.11294 	 0.38333 
38	 0.07678 	 0.36667 
39	 0.03915 	 0.35000 
40	 0.00000 	 0.33333 
50	 -   		 0.28330 
60	 -   		 0.23330 
70	 -   		 0.15000

To Determine Balance Owed on a Financed Starship:

"Balance" is the fraction of the ship's starting cost that is owed at the end of the year.

So, if your players want to pay off a ship at the end of month 360, multiply its starting cost by .32955 to get what's owed.

To Determine Cost of a Used Starship

"Value" is the fraction of the ship's starting cost that a used ship of the indicated age will be worth on the retail market.

Find the age of the ship in years. Multiply its starting cost by the number in the Value column. This is the retail cost of a ship in good condition (i.e. with average wear and tear). For especially worn ships or ships in good condition, increase or reduce the effective age of the ship.

So a 30 year old ship that costs MCr100 new would cost MCr50.00 if in good condition. If it was badly used, it would cost the same as a 35 year old ship, or MCr41.667.

Notes

The values are based on my assumption that a bank would want to maintain a 20% equity cushion on a financed starship for years 1-28, with an increasing equity cushion thereafter. Thus, the average used ship values would have to support that. Also, it's dramatically desirable to allow for really old ships, so the depreciation tapers off after year 40.

 

[Drakon]

It seems that you should have modifiers for maintenence records, wear and tear and such. Also it seems that the market would determine how much a used ship would be worth. Now how to game what the market wants.

It seems that tech level of the system, compared to the tech level of the ship, the number of jump routes through the system.

 

[tbeard1999]

It seems that you should have modifiers for maintenence records, wear and tear and such. Also it seems that the market would determine how much a used ship would be worth. Now how to game what the market wants.

Banks must have a certain equity cushion* or they will not loan money on the proposed terms. Therefore, the bank loan terms are a very good indicator of how much the market will value a starship. If the market values used ships lower than shown on the chart, then banks will require higher interest rates, larger down payments, and/or shorter loan terms. If the market values used ships higher than shown on the chart, then banks will allow lower interest rates, smaller down payments, and/or longer loan terms.

In CT, the loans are for a very low interest rate (3.98%) and for a very long time (40%). This implies that starships have a very long useful life, compared to TL8 machinery like cars or even ships. Borrowers are required to put 20% down, which implies that the banks require a 20% equity cushion.

I chose a 60 year useful life, then tweaked the chart so that ancient ships would have some residual value (and so that the bank would always be able to maintain a 20%+ equity cushion). EDIT: See the alternate chart below for an example of a 50 year service life (tweaked to make the bank financing reasonable and to provide some residual value).

Seems a reasonable approach to me.

And if you'll re-read my post, you'll see that I offered guidelines on how to price a heavily used ship or a lightly used one.

Of course, it's a given in *any* rule I propose that the referee can/should change it to reflect local conditions. This is just the equivalent of "Blue Book" values for cars.

*An "equity cushion" is the percentage of total value that exceeds the loan balance. The higher the equity cushion, the better protected the bank is. The higher the equity cushion required by the bank, the greater the down payment required. Standard CT financing terms require a 20% equity cushion to start with (this is the effect of having a 20% downpayment).

 

[tbeard1999]

I'd add that used starships should have far higher maintenance costs than new ships -- otherwise, why build many new ships? If referees want new ships to predominate, then the increase in maintenance costs should be so steep that after X years, it's more economical to put a new ship into service.

It may also be that constant exposure to outer space and/or jumpspace causes sufficient metal fatigue to render a starship hull (and possibly internal components like drives) unflightworthy after a certain time frame. At that point, it's cheaper to build a new ship than re-build an old one.

Sample rule -- every year of average operations adds X points to the ship's Fatigue Rating. When the Fatigue Rating reaches 100, the ship is in danger of a major hull (or drive) failure. The chance is a percentage: (Fatigue Rating - 100) per month of operations. Failure to perform routine maintenance each year adds 1D-3 fatigue points (or average 1 point per year).

Major overhauls will subtract Xd6 fatigue points (this will be tracked secretly by the referee). Cost is Y% of the ship's original cost. Overhauls take an average of 2 months. Only Z fatigue points can be removed from a ship by overhauls (additional overhauls are Z fatigue points are removed have no effect).

For instance, in a "new ships are common" campaign, each year of average operations adds 4 fatigue points. After 25 years of operation, a ship has 100 fatigue points. At the end of the 26th year, the ship accumulates 4 more points. For the following year, there's a 4% chance of major hull or drive failure in each month of operations. (That's about a 39% chance of a failure occuring sometime that year). Overhauls subtract 2d6 fatigue points and cost 3% of the ship's original cost. Only 12 fatigue points can be recovered by overhauls.

 

[tbeard1999]

Alternate Chart

Here's a chart that makes starships less valuable than my first chart. Here, starships are only worth about 20% of their purchase price after 40 years.

Year	 Balance 	 Value 
1	 0.79169 	 0.98961 
2	 0.78303 	 0.97879 
3	 0.77403 	 0.96754 
4	 0.76467 	 0.95583 
5	 0.75492 	 0.94365 
6	 0.74478 	 0.93097 
7	 0.73423 	 0.91778 
8	 0.72325 	 0.90406 
9	 0.71182 	 0.88978 
10	 0.69993 	 0.87492 
11	 0.68756 	 0.85945 
12	 0.67469 	 0.84336 
13	 0.66130 	 0.82662 
14	 0.64736 	 0.80920 
15	 0.63286 	 0.79108 
16	 0.61777 	 0.77222 
17	 0.60207 	 0.75259 
18	 0.58574 	 0.73217 
19	 0.56874 	 0.71092 
20	 0.55105 	 0.68882 
21	 0.53265 	 0.66581 
22	 0.51350 	 0.64187 
23	 0.49357 	 0.61697 
24	 0.47284 	 0.59105 
25	 0.45127 	 0.56408 
26	 0.42882 	 0.53602 
27	 0.40546 	 0.50682 
28	 0.38115 	 0.47644 
29	 0.35587 	 0.44483 
30	 0.32955 	 0.41194 
31	 0.30217 	 0.38000 
32	 0.27368 	 0.36000 
33	 0.24403 	 0.34000 
34	 0.21319 	 0.32000 
35	 0.18109 	 0.30000 
36	 0.14769 	 0.28000 
37	 0.11294 	 0.26000 
38	 0.07678 	 0.24000 
39	 0.03915 	 0.22000 
40	 0.00000 	 0.20000 
50	 -   	 0.18000 
60	 -   	 0.15000 
70	 -   	 0.12000 
80	 -   	 0.10000

 

[Icosahedron]

Well, I'm no accountant so I don't know how the market works, but that looks like a very linear scale. I feel that used ships should have a steep early drop in value, like cars, and a significant residual value. There should also be a scrap value.

The steep initial drop would tie purchasers in to the lenders with a negative equity situation, so there would be very few 'young' ships for sale - your only option is to buy new or 'old'. I reckon the break-even point might come at about 30 years or so.

I designed a value chart based on this vision rather than a study of RL market forces, but it works for me.

 

[tbeard1999]

EDITED; COI went offline in the middle of this revision yesterday.

Well, I'm no accountant so I don't know how the market works, but that looks like a very linear scale. I feel that used ships should have a steep early drop in value, like cars, and a significant residual value. There should also be a scrap value.

The steep initial drop would tie purchasers in to the lenders with a negative equity situation, so there would be very few 'young' ships for sale - your only option is to buy new or 'old'. I reckon the break-even point might come at about 30 years or so.

I designed a value chart based on this vision rather than a study of RL market forces, but it works for me.

The rate of decline starts out modest and increases as the ship ages. Then it decreases after year 30 and especially after year 40. This pretty much *has* to be the case if banks are willing to loan money at such low fixed interest rates for such long periods of time.

That said, the average decline in value is:

After 10 years, 13% decline in value;
After 20 years, 31% decline in value;
After 30 years, 50% decline in value;
After 40 years, 67% decline in value;
After 50 years, 72% decline in value;
After 60 years, 77% decline in value; and
After 70 years, 85% decline in value.

So the depreciation rate was forced on me by the CT starship loan characteristics.

If a ship depreciated like you describe (and like cars do now), banks would have to require:

(a) shorter loan terms;

(b) higher interest rates; and/or

(c) higher downpayments.

 

[Mark Morgan]

Banks must have a certain equity cushion* or they will not loan money on the proposed terms. Therefore, the bank loan terms are a very good indicator of how much the market will value a starship. If the market values used ships lower than shown on the chart, then banks will require higher interest rates, larger down payments, and/or shorter loan terms. If the market values used ships higher than shown on the chart, then banks will allow lower interest rates, smaller down payments, and/or longer loan terms.
.

auto go through negitive equidity under many types of loans made these day (or was before the finacal meltdown)

the idea that say 5-10 yo starship migtht owe more than it was worth seem reasonable in that light, althought clearly it adds to the chance of skipping but maybe as here the note has already been sod the Imperail equiv of Fanny Mea or Freddy Mac


witht the peotencail in bad result for the 3rd Imperium or maybe it was such notes that realy brought down the Rule of Man

 

[Drakon]

The idea that the banks should know the value of the property they are offering mortages on, is obvious. But this focuses solely on the quality of the ship, its maintainence records, time since overhaul, etc. This is all important, granted, but it is only half of the equation.

The number of ships and quality determines the supply of shipping services. Factors such as tech level differences, populations size, and other marketing data determines the market for those shipping "berths". Demand will have a large effect on how often ships are overhauled and long they are kept in service.

Now advances in technology and modular design should build ships that are virtually immortal, in a sense that some Japanese Shinto shrines have been around for over a thousand years. When an old wood beam gets rotten, it gets replaced. The design of the temple allows major replacements without scrapping the whole structure.

Also, there may sprout up regions where market forces are ideal for newer ships, near regions of space where shipping prices are more suited to older ships. Older ships can be serviced by lower tech starports. There could a profitable business in transferring older ships from one region to another.

 

[Drakon]

OR using cannon when available different ship types and the manufacturer of the ship would determine some variable to how much the ship's value changes with age.

Example:
The Kinunir 1200t Battle Cruiser

The ships produced by the shipyard General were not of as good as quality as most of the others ships (based on text of the cannon material)
And Ling Standard is known Imperium wide as a good solid ship builder (based on various cannon material printed)

Also the 1200 ton Battle Cruiser has a limited market appeal. If you are or expect to be at war with a sufficiently powerful force that would warrent one, well, you'd probably pay a pretty penny for one.

On the other hand, another market may not have the percieved need for one.

 

[tbeard1999]

auto go through negitive equidity under many types of loans made these day (or was before the finacal meltdown)

the idea that say 5-10 yo starship migtht owe more than it was worth seem reasonable in that light, althought clearly it adds to the chance of skipping but maybe as here the note has already been sod the Imperail equiv of Fanny Mea or Freddy Mac


witht the peotencail in bad result for the 3rd Imperium or maybe it was such notes that realy brought down the Rule of Man

I agree that it is possible for banks to be upside down equity-wise. But in my experience, they *never* plan for it to be that way (unless there's another source of security, such as a huge cash flow, or the personal guaranty of a wealthy individual, etc.).

And as noted, the characteristics of CT loans (very low interest, fixed rate, very long terms) imply that the overall economy in the 3I is very stable, with little or no inflation or other dramatic upheavals.

 

[tbeard1999]

Also the 1200 ton Battle Cruiser has a limited market appeal. If you are or expect to be at war with a sufficiently powerful force that would warrent one, well, you'd probably pay a pretty penny for one.

On the other hand, another market may not have the percieved need for one.

Oh, I agree. My charts are just the equivalent of the "Blue Book" for starships. (The "Blue Book" -- which is actually yellow -- is a book that lists average prices for used cars and trucks. Make, model, mileage, condition and region are all taken into account. Bankers use the wholesale version to calibrate loans on used cars.)

Local conditions can profoundly affect pricing. (A real world example was the precipitous decline in value of used SUVs. When gas prices spiked, the used car market was flooded with gas-guzzling vehicles. And when supply increases, prices tend to decrease.)

 

[sabredog]

While on one hand the 1200 ton battered old cruiser might not hold its value during peacetime - especially if of a lower tech level, on the other hand that might make it just the bargain some enterprising speculator might want in order to gut it and refit it as an armed merchant. Or exploration ship for some university or exploration team on a budget.

My player's first ship was an old 600 ton corvette built to TL-12 standards that they got for a steal because it was so old that even it's lasers used vacuum tubes and the computers were analog. Well, maybe not, but it did have a couple of the turrets burnt out and was pretty out of date. It did have Jump-2 drives so that really sealed the deal.

So they got it at the price a new Free Trader would be and refit it as a cargo/passenger carrier. Gradually were able to pay it off in less time than if they had bought a new ship. And all the random little quirks inherent in 40 year old former revenue cutter were an endless source of role-playing amusement and frustration for all of us.