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Steinway Depreciation Questions
#3012695 08/11/20 02:11 PM
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Hi everyone,

I’ve been doing some research into understanding the market for used Steinway pianos. This has led me to Larry Fine’s guide to Steinway depreciation from pianobuyer.com. However, I am having a lot of problems with the methodology of using the “current” new Steinway MRSP price as a benchmark for setting depreciation. It seems to me that one could purchase a new Steinway at a dealer, wait 15 years and sell it back to the dealership for only a slight loss, only for the dealer to theoretically sell the used 15 year old Steinway for similar price a brand new Steinway.

I’ll explain how I got there with some simple math: could someone point out if I am missing something obvious here?

I am using this Steinway website for historical MRSP prices
http://www.steinwaybocaraton.com/knowledge-base/historical-prices-of-steinway-pianos
I am using the Steinway depreciation schedule from Larry Fine’s website:
https://www.pianobuyer.com/article/buying-a-used-or-restored-piano-how-much-is-it-worth/

So we are comparing apples to apples, let’s look at the Model O.
1995 MRSP of a new Model O $34,500
2010 MRSP of a new Model O $62,600

Let’s say I bought a 1995 Model O brand new, in the year 1995 with 1995 dollars for $34,500. In 2010, my 1995 Model O will be 15 years old. The website states that for a 15 year old Steinway, in “better condition” the private resale value will be around 60% of the MRSP of a 2010 Model O, in 2010 dollars.
Therefore, 62,500 (2010 MRSP Model O) * 0.6 = $37,500
Furthermore, if the sale is to take place from a dealership unrestored, but with extended warranty, an addition 20-30% to the computed value is suggested.
Therefore, 37,500 * 1.25 (average of 20-30%) = $46,875
Is there any way that this is true based on reality? How is it economically possible that a Steinway piano purchased for $34,500 can resell for $37,500 privately 15 years later, and even sell for more than it was purchased for at $46,875 if it’s through a dealership? I can’t think of sort of product/asset that has a limited lifespan, is used, appreciating with time?? I guess real estate goes up with time, but it’s land that goes up in value not the actual house which always depreciates?

Even accounting for inflation using the following website, https://www.in2013dollars.com/us/inflation/1995?endYear=2010&amount=100

34,500 (1995 dollars) x 1.43 (inflation% from 1995 to 2010) = $53,625
$46,875/$53,625 = 87%. I seriously doubt that even factoring in inflation that a 15 year old Steinway piano in “better” condition is only to lose 13% of it’s value when resold from a dealership.

So please help me here, am I missing something? Thanks 

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Re: Steinway Depreciation Questions
grantweep #3012713 08/11/20 03:18 PM
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The NY factory didn’t produce a model O in 1995. It made the L, which tends to be slightly less valued as a used piano mostly because it’s not a current model.

Why are you trying to retroactively prescribe the depreciation table? That’s really confusing. Also, many Steinway dealers are more willing to make deals that aren’t full MSRP since the ‘08 recession...so you’re kind of starting with bad data.

The depreciation schedule is a rough guide.


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Re: Steinway Depreciation Questions
terminaldegree #3012719 08/11/20 03:30 PM
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Originally Posted by terminaldegree
The depreciation schedule is a rough guide.

There is the key. Depreciation is dependent upon demand. Frankly, a new Steinway piano at retail has much less demand than it did 20 years ago. Those days are pretty much gone, IMHO, unless a consumer walks in blind and does no research.

The reason is that there are more really great choices today than I can remember in my 30+ years in this business. People can easily find out about alternatives with a quick google search and it is fairly easy to find where one can see these other choices as well.

I am also curious about the reason for your questions.

Also, welcome to PW.


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Re: Steinway Depreciation Questions
terminaldegree #3012726 08/11/20 03:50 PM
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Originally Posted by terminaldegree
The NY factory didn’t produce a model O in 1995. It made the L, which tends to be slightly less valued as a used piano mostly because it’s not a current model.

Why are you trying to retroactively prescribe the depreciation table? That’s really confusing. Also, many Steinway dealers are more willing to make deals that aren’t full MSRP since the ‘08 recession...so you’re kind of starting with bad data.

The depreciation schedule is a rough guide.


Thanks, good point about the O/L. I could have picked a better comparison. If what you are suggesting is true and that I could get a new Steinway for more of a discount, maybe 20 or 30% off MRSP, then I believe it supports my position that the pricing guide doesn't seem right. (Since the value of the used piano is calculated from the MRSP of a new model, not the discount that you could get from the dealer).

So if I understood your logic correctly, if I could get a new Steinway for much cheaper than the MRSP price, then based on Larry Fine's Steinway depreciation guide, I could maybe even sell the piano for more than I bought it for, since the depreciation calculations are based off MRSP for new models, not what people pay for the new models.

Once again, am I missing something here?

Re: Steinway Depreciation Questions
Rich Galassini #3012729 08/11/20 03:57 PM
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Originally Posted by Rich Galassini
Originally Posted by terminaldegree
The depreciation schedule is a rough guide.

There is the key. Depreciation is dependent upon demand. Frankly, a new Steinway piano at retail has much less demand than it did 20 years ago. Those days are pretty much gone, IMHO, unless a consumer walks in blind and does no research.

The reason is that there are more really great choices today than I can remember in my 30+ years in this business. People can easily find out about alternatives with a quick google search and it is fairly easy to find where one can see these other choices as well.

I am also curious about the reason for your questions.

Also, welcome to PW.

Thanks for the welcome!

I think it's fair to say that the guide is just a rough guide, not a definitive way of calculating value. Could you show me an example of how you would use the Steinway depreciation guide by Larry Fine in a real life practical situation? You are right that a lot of information is there on the internet, but anything on the internet requires a degree of skepticism and it's probably not a good idea to just agree with what's posted because you feel good about. I want to understand the factors that go into calculating depreciation value for Steinways.

I am asking because I am in the market for a Steinway piano. And it's very difficult to figure out what they actually sell for. It's easy to find the asking price however! And I guess I'm just stating that I am highly skeptical of these prices, which seem consistent with these various Steinway pricing guides I've seen online.

Re: Steinway Depreciation Questions
grantweep #3012734 08/11/20 04:14 PM
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Originally Posted by grantweep
And it's very difficult to figure out what they actually sell for. It's easy to find the asking price however!
There's a few ways to get an idea of sales prices. On ebay if you turn on the flag for sold items you will see exactly what it sold for. On pianomart.com you can turn on the sold flag and although you can only see the most recent asking price, it's a pretty good bet it didn't sell for more than that amount. So at least that puts an upper limit on what it sold for.


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Re: Steinway Depreciation Questions
grantweep #3012760 08/11/20 05:26 PM
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grantweep,

Please consider that inflation of pianos has been higher than general inflation in the US for the same period of time. I also would not look at a retro-active table for 1995 - 2010. For what purpose would you not work from current 2020?


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Re: Steinway Depreciation Questions
PianoWorksATL #3012766 08/11/20 05:40 PM
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Originally Posted by PianoWorksATL
grantweep,

Please consider that inflation of pianos has been higher than general inflation in the US for the same period of time. I also would not look at a retro-active table for 1995 - 2010. For what purpose would you not work from current 2020?


Thanks for your response, I don't have reliable data for 2020 prices. I live in Canada and when I went to one Steinway dealer I was quoted around 150,000CND for a base model A, when I went to another Steinway dealer I was quoted 130,000CND for a base model A.

I like to play with numbers, and I like to make apples to apples comparisons, therefore I used the above website for reference value. Since I am not so much interested in the absolute value, but relative value of these pianos from time to time.

If you have the MRSP for a Steinway model A for 2020, and the MRSP for Steinway model A in 2005, I would gladly do the calculations and see if they support my conclusion that Larry Fine's depreciation guide intuitively seems off. smile

Yeah, I did get the sense that these pianos appreciate faster than inflation. A lot of variables I know, and I'm trying to input as many variables as I can to figure out the best way to calculate Steinway depreciation! Do you have any suggestions for how to calculate it?

Re: Steinway Depreciation Questions
grantweep #3012779 08/11/20 06:14 PM
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What you are completely leaving out of the equation is the cost of maintenance. Unless a piano is held in storage for any number of years, there will be wear and tear on certain parts of the action, it asks for tuning at regular intervals, hammers needing re-shaping, voicing, dampers readjusted, action regulated. A piano of a certain quality needs a certain quality of maintenance - and that is money well spent, but it's also money you actually spend to keep it in shape.

If you're neglecting maintenance, the appraiser will easily point out all those things and tell you that he would only buy it at a drastically reduced price, because he is the one needing to invest into getting it back into a pristine shape.

Seems to me there is a lot of wishful thinking going on in terms of seeing a piano as an investment.

Re: Steinway Depreciation Questions
OE1FEU #3012784 08/11/20 06:28 PM
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Originally Posted by OE1FEU
What you are completely leaving out of the equation is the cost of maintenance. Unless a piano is held in storage for any number of years, there will be wear and tear on certain parts of the action, it asks for tuning at regular intervals, hammers needing re-shaping, voicing, dampers readjusted, action regulated. A piano of a certain quality needs a certain quality of maintenance - and that is money well spent, but it's also money you actually spend to keep it in shape.

If you're neglecting maintenance, the appraiser will easily point out all those things and tell you that he would only buy it at a drastically reduced price, because he is the one needing to invest into getting it back into a pristine shape.

Seems to me there is a lot of wishful thinking going on in terms of seeing a piano as an investment.

I completely agree with this, especially your last statement. I guess what I'm really trying to say with my original post is that I don't "buy" this idea that a piano can hold it's value this well over time. However, based on my understanding of the rough depreciation guide, it seems to suggest that a Steinway grand can in fact hold it's value, at least in nominal dollars. So yeah, thanks for your thoughts. I do wonder though how much maintenance is required for a piano less than 20 years old. I am very new to this, and seems to me that 20 years seems to be when maintenance issues start popping up.

-grant

Re: Steinway Depreciation Questions
grantweep #3012800 08/11/20 07:22 PM
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Originally Posted by grantweep
[...]
If you have the MRSP for a Steinway model A for 2020, and the MRSP for Steinway model A in 2005, I would gladly do the calculations and see if they support my conclusion that Larry Fine's depreciation guide intuitively seems off. smile
[...]

2020 Steinway Model A, Satin and Polished Ebony (is that what you mean by "base' model?): MSRP $101,100.00 US. = $133.675 CDN. Current prices can be found by brand by going to PianoBuyer.com a link to which is in the side panel on the right of each thread.

Regards,

Last edited by BruceD; 08/11/20 07:24 PM.

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Re: Steinway Depreciation Questions
grantweep #3012810 08/11/20 07:49 PM
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Originally Posted by grantweep
1995 MRSP of a new Model O $34,500
2010 MRSP of a new Model O $62,600

Let’s say I bought a 1995 Model O brand new, in the year 1995 with 1995 dollars for $34,500. In 2010, my 1995 Model O will be 15 years old. The website states that for a 15 year old Steinway, in “better condition” the private resale value will be around 60% of the MRSP of a 2010 Model O, in 2010 dollars.
Therefore, 62,500 (2010 MRSP Model O) * 0.6 = $37,500
According to the online inflation calculator 34.5K in 2010 is worth the same as 24.1K in 1995, so in that sense the Steinway hasn't really held its value. Because of inflation I'm not at all sure the Depreciation Schedule is meant for the kind of retrospecitive calculation you did. I think it's more suitable for finding the current value of a used piano.

Re: Steinway Depreciation Questions
grantweep #3012819 08/11/20 08:50 PM
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You guys are right. Using historical data is too confusing. Okay, let me do the calculations for 2020 data! (In Canadian Dollars)

2020 New Steinway Model A = $133, 675
2005 New Steinway Model A = ?, if we assume 4% inflation in steinway prices yearly, then my estimate will be that the price will be = estimated at $75,000 (if anyone knows a source where I can find historical prices of Steinway model A’s then please point me in the right direction)

Larry Fine’s technique for approximating used Steinway Value:
2005 (15 year old) Steinway Model A = 133,675 * 0.60 = 80,205$ (Private sale value)
2005 (15 year old) Steinway Model A = 80,205 * 1.25 (average of 20-30%) = $100,256 (Piano dealer value

For the people in the forum who have experience with used Steinways: would it make sense that a 2005 Steinway Model A’s private sale value ($80,205), is less than my estimated MRSP for if the Steinway Model A was purchased new in 2005 (estimated $75,000)?

Additionally, if the piano was purchased through a dealer, it would be even higher at $100,256!

Okay, let’s factor in inflation for fun using this site:
https://www.in2013dollars.com/canada/inflation/2005?amount=100

Inflation between 2005 and 2020 in Canada was 26.77%

Therefore, the estimated MSRP for the 2005 new Steinway Model A would be: $75,000 * 1.2677 = $95,000

Even when taking into account inflation, Larry Fine’s guide suggests that a 2005 Steinway piano would retail for more than it sold for in 2020 if it was resold by a piano dealer. Obviously there will be costs involved in transporting, tuning and maintaining the piano so I’m not suggesting that this is some sort of fancy money scheme. But come on, does anyone seriously believe that this is even close to what a Steinway value should be? I know it’s supposed to be a guide. But unless I’m using it wrong, (And please let me know if I am), I am not seeing how this guide is useful at all in helping me make an offer on a used Steinway.

-grant

Last edited by grantweep; 08/11/20 08:51 PM. Reason: Forgot to add that this calculation was in Canadian Dollars
Re: Steinway Depreciation Questions
grantweep #3012823 08/11/20 09:08 PM
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I believe the used piano depreciation schedule calculations are based on the street or selling price, not the asking or retail price. Although Steinway dealers don’t tend to give the somewhat more typical 20 to 30% discount from, let’s more rightly use the SMP pricing, these days most of the non-company owned stores will entertain discounted offers. I have less experience personally with the company owned stores in both private sale or bid situations, and I don’t want to give out incorrect information.


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Re: Steinway Depreciation Questions
grantweep #3012825 08/11/20 09:17 PM
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Originally Posted by grantweep
You guys are right. Using historical pdata is too confusing. Okay, let me do the calculations for 2020 data! (In Canadian Dollars)

2020 New Steinway Model A = $133, 675
Why are you using Canadian dollars? You should use the SMP values in the Piano Buyer and American dollars. In the US the SMP for a 2020 Steinway A in the Spring 2020 PB is around 101K.

Re: Steinway Depreciation Questions
pianoloverus #3012826 08/11/20 09:19 PM
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Originally Posted by pianoloverus
Originally Posted by grantweep
You guys are right. Using historical pdata is too confusing. Okay, let me do the calculations for 2020 data! (In Canadian Dollars)

2020 New Steinway Model A = $133, 675
Why are you using Canadian dollars? You should use the SMP values in the Piano Buyer and American dollars. In the US the SMP for a 2020 Steinway A in the Spring 2020 PB is around 101K.


How would my end calculation change if I used USD?

Re: Steinway Depreciation Questions
terminaldegree #3012827 08/11/20 09:20 PM
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Originally Posted by terminaldegree
I believe the used piano depreciation schedule calculations are based on the street or selling price, not the asking or retail price. Although Steinway dealers don’t tend to give the somewhat more typical 20 to 30% discount from, let’s more rightly use the SMP pricing, these days most of the non-company owned stores will entertain discounted offers. I have less experience personally with the company owned stores in both private sale or bid situations, and I don’t want to give out incorrect information.



The SMP for Steinway pianos appear to be the same as the MRSP on Larry Fine's website.

Re: Steinway Depreciation Questions
grantweep #3012828 08/11/20 09:24 PM
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Can’t you folks feel the tension brewing ......

I have got my popcorn , big screen , feet up waiting for the conclusion

I can feel different camps cringing, waiting to pounce on the smallest error ...

Just like an election recount ......in December

I can see whispers behind the scene....who is this person bringing such a touchy topic with only 8 posts ...could he / she be a spy bot ?


Well done is all I can say for starting this thread. Very well done. Long overdue

Re: Steinway Depreciation Questions
grantweep #3012829 08/11/20 09:34 PM
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As long as the Depreciation Schedule, is according to GAAP (Generally Accepted Accounting Principles), I see no problems here

Carry On!


~Lucubrate

Last edited by Lucubrate; 08/11/20 09:43 PM.

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Re: Steinway Depreciation Questions
Lucubrate #3012830 08/11/20 09:37 PM
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Originally Posted by Lucubrate
As long as the Depreciation Schedule, is according to GAAP (Generally Accepted Accounting Practices), I see no problems here

Carry On!


~Lucubrate

lol, tell us what you really mean!

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