Business Or Pleasure: How to Buy The Right Pre-Owned Private Jet
The number of used jets available has now dropped to below pre-financial crisis levels. With current market conditions seeing companies and individuals buying up used private jets, you may ask yourself – “Should I buy a used jet? And if so, how can I buy the right one?”
In June this year, Bloomberg Wealth released an article that highlights a change from a seller’s to a buyers market around the end of the year. The growth in interested buyers has been attributed to a number of factors such as expanding businesses, lowered corporate tax rates, and even President Trump’s open support of traveling via his private jet.
According to JPMorgan Chase, the average asking price for pre-owned jets rose 1.5% in April to $9.7 million and then 2.4% in May. This is while used-jet prices are still down nearly 25% compared to the third quarter of 2015. The availability of pre-owned options has also dropped, linked to factors such as extended ownership with owners now holding onto jets for six to nine years instead of swapping them out every four to five. This is being driven by reduced depreciation through proper maintenance. Some owners are also deciding not to sell all together, opting to lease or charter their jets instead.
But if now is the best time to get a used plane, how can you make sure you purchase an investment, instead of a costly problem? In this article we will share some tips about choosing the right jet, understanding your needs, what your options are, what to look out for, how to be prepared, and who you will need to help you so you snatch up a reliable bargain, instead of a flying money pit.
Deciding To Buy New vs. Used
Most buyers believe that purchasing new is the first or only choice. A new private jet, boat, or car, doesn’t carry the history or usage that a pre-owned carries. Warranties, service deals, maintenance, and many other factors besides just price can sway your decision. Also adding in new technologies that can save on operating expenses, purchasing a new private jet can seem like the smarter decision on multiple fronts.
Even speaking with a broker, you might be further sold on new instead of used because “You will spend the same buying new than buying old, as most pre-owned jet cost more to operate, where new jets only cost more to acquire.” But why are pre-owned private jets being purchased in large numbers then? And why would you choose to buy a used private jet, over a new one?
The answer is simple – Aircrafts don’t age like automobiles. Aircrafts are maintained to exacting tolerances and can have a usable life of well past 50 years and over 50,000 flight hours. Some older models are even more reliable than new models! This makes considering a pre-owned jet a viable and possibly better decision.
As we will outline in this post:
- Where to buy pre-owned
- Understanding your needs
- Knowing your options
- Finding the model that meets your needs
- Choosing the right pre-owned jet with the right help
- Maintenance & Projecting Future Costs
- Reviewing records and inspect
- Finalizing your purchase
We recommend having an experienced team of professionals to help you during each step, and we will outline who those people are. By doing your research, checking records, thoroughly inspecting, and identifying repairs or maintenance costs required, you are able to mitigate most of the risk when buying a pre-owned jet. Purchase a reliable aircraft that meets your needs at the best possible price.
Deciding Between a Pre-owned or New Private Jet
Choosing new or used depends on the aircraft’s model, year, and condition. Here are some considerations to help you decide:
- New – Warranty included, reliability, operating and maintenance costs
- Pre-owned – service and maintenance history, storage, usage
- Maintenance cycle – for pre-owned what has been replaced or will need to be replaced soon
- Operating costs – New jets will cost less to operate than older jets
- Fixed Costs – pilots, mechanics, flight attendants, hanger costs, etc.
1. Where to Buy a Used Jet
Many first time buyers can jump into a decision on a plane when it seems like a deal. But even the most knowledgeable buyer needs an experienced second opinion. Although finding one can be as simple as going to sites like AV Buyer, Controller, Business Air, or other online/offline auctions or listing, buying a used jet requires professional diligence.
Jet Brokers & Jet Management Firms
This is where finding a good jet broker or Jet Management Company comes in. Either will be able to find a quality pre-owned jet and help you conduct the proper checks needed while meeting your needs and budget. A management company will also assist with getting your jet chartered. This can help you balance out or recoup some of the costs of maintenance and ownership.
As a rule to live by, from the broker to the mechanic you should double-check everyone’s opinion. You need to ensure you get a non-bias assessment on its current state, upcoming repairs, and have someone do a thorough inspection. A private jet is a large investment, and by simply investing time and diligence in the right areas will help mitigate the risk out of buying a pre-owned jet.
2. Understanding Your Needs
Do you want to buy a private jet for business or personal use? When it comes to first-time private jet buyers, one of the most common mistakes that is made when purchasing a private aircraft is buying one that isn’t right for your needs. Avoid purchasing something too big to impress someone, so expensive it becomes a burden, too old riddled with problems or the wrong new model with defects. Have a clear picture of when and why you will use your private jet by making a real assessment of your needs.
You can figure out your needs by asking:
- Will this private jet be used for business trips and meetings? Or will it primarily be for pleasure, travel, and to escape?
- For business understand how tax write offs and depreciation can work in your favor
- What distance will you be traveling regularly? Across the state, Cross-country, or overseas?
- Does chartering a private jet make more sense than purchasing right now?
- How many hours will you be flying (or currently flying)?
- How many people will you be taking with you regularly?
- Will this be a business enterprise itself – charter or commercial?
If you’re buying a jet for commercial or chartering usage, then source a successful Jet Management Company. They can help you find and buy your jet while also chartering it once it’s been purchased. But make sure they have the capacity to take you on and will able to charter your jet. For commercial usage, select a partner or company that has a good reputation, years of experience, and can deliver on your usage aspirations.
If your purchasing for commercial or charter usage consider:
- Your average business trip length and the range your charter will travel
- Your expected number of passengers
- Whether purchasing new is a wiser option than pre-owned
- Whether you’re willing to give up use of your jet during busy times of the year such as holidays when the demand is highest
- Which pre-owned jets that you have available to you
Chartering is best viewed as a means to level out the operating and maintenance costs of your jet. Although there are success stories, short of purchasing it as an investment and not using your private jet, most find it difficult to turn a profit. The success of chartering your private jet or any commercial aspirations rests on where it is located and selecting the right jet Management Company or partners.
Complete a cost vs. benefit analysis as part of figuring out your needs.
3. Know Your Options
Before contacting a jet broker or jet management company, you need to understand which jet option is right for you. As outlined in our “When is The Right Time to Buy a Jet?”, when it comes to jets there are 5 types of jets to choose from. These are classified by size and based on nautical mile range, flight time, and passengers carry capacity:
4. Select Based on Your Needs
Buying a used private jet that meets but does not exceed your needs, helps ensure you get the most value out of your investment. All sizes have their pros and cons, but being realistic about your usage and buying the jet you need will save on maintenance costs, fuel, stops, and much more. I know the flashy gadgets or new features may catch your attention, but working with a management or jet broker worth their weight will steer you toward the private jet that meets your needs over spending millions on something you don’t need.
Planning to travel to remote locations for work or to escape? Smaller airports or landing stripes mean a long-range jet most likely won’t be able to land. Need to get across the country quickly for a meeting or sale? A new light jet would require extra stops, where a reliable older model mid jet could do be the trick, costing less in fuel than flying a super or heavy jet.
Say for example you usually do shorter local trips between 100-600 miles and need a jet. A turboprop jet can be a good fit like the King Air or Pilatus, as well for some remote and small airports. A step up in speed for shorter trips under 2.5hrs is best with a light private jet, like the popular Cessna Citation Mustang or value driver Citation CJ1.
If you’re expecting regular company of 11+ and traveling international, then getting a heavy size jet is a better fit to fly over 8+hrs. Examples of quality heavy size jets are the Gulfstream GIV G450 or Falcon 20000EX. But when a packed flight is a very rare occurrence, or primarily you fly across the USA, then a wiser option is to look into a super jet. They can comfortably fly your family or team every time, and simply charter a heavy jet for those rare group trips.
Super private jets have become a favorite for cross-country journeys such as the Cessna Citation Sovereign. For up to 9 passengers, it provides roomier cabins, fully enclosed lavatory, and can get you from New York to Los Angeles or any 5hr-7hr flight range. Many small jet owners upgrade to the supersize jet for the added headroom, space to move about, and longer distance to keep up with their growing business.
5. Choosing the Right Pre-owned Jet
Once you know the type of jet you’re after, work with someone that is well versed in that type of aircraft to understand what to look out for and what to expect. This is especially true when it comes to certain models. Some older models after maintenance and repairs may end up costing more than a new model. Then again, some older models might be better for reliability than new models. Depending on your needs, bigger jets might not always be better than smaller ones.
Consulting more than one expert is vital at this stage.
Consult a Professional Experienced With That Model
Certain older models can still be very reliable if in the right condition, even on longer trips. When purchasing a private jet through a jet broker or management company, your best bet is always to include an experienced airplane-maintenance technician, familiar with that model and year. You want someone to walk you through what to expect and look out for, especially to look over your jet before you purchase it.
What To Ask the Seller
The first step is to understand the story and history of the jet. From its primary usage, where it was located, flight and maintenance records, get a real picture of its past so you can know if it’s present state will remain so into the future.
Wise considerations when purchasing a used jet include:
- Where has the jet been stored? It’s best to avoid salty air and hot locations, such as Louisiana. Areas with dry and clear air, such as Arizona are much more favorable.
- Who primarily took care of the jet? Make sure all logs are accurately accounted for and that the previous caretakers knew what they were doing.
- What was it primarily used for? Find out if the aircraft was used for personal or business trips and how frequently the trips were taken.
Factors That Affect Value of Pre-owned Aircraft
As shared through Textron Aviation, there are 7 factors that affect the value of pre-owned aircraft and their resale value:
- Airframe Hours and Age – Early in the aircraft’s life-cycle is when total airframe hours have greater impact on its value.
- Engine Hours – Determine how soon the engine will need to be repaired or replaced based on the recommended engine overhaul hours.
- Installed Equipment – New or recently updated equipment can increase the price while older gadgets can lower it. Determine if you’re willing to pay more for less chance of having to deal with equipment issues yourself.
- Records and Airworthiness Directives – Be sure to eview all records, logbooks, certificates, equipment lists, FAA-approved aircraft manual and owner’s manual.
- Damage History – If the aircraft has been damaged in any way, consider the accident type, nature of damage, repairs, and how or if it has affected major components.
- Paint – New paint can increase value, but it may also hide corrosion that could lead to bigger issues down the line.
- Interior – Has the interior been recently updated? Usually a well-kept original interior is a good indicator the owner has looked after the aircraft as a whole. However, like a new paint job, a new interior could be a distractor from looking closely under the hood.
When purchasing a model older than 15 years, it can cost anywhere from 20-25% more for maintenance than what is quoted for that model by reputable sources. Learn more about how to find a used private jet at a bargain.
6. Maintenance Projections & Lifecycles
One of the biggest arguments for purchasing new or used private jets is the maintenance costs. Older jets tend to require more work, as parts run down and wear out over time. This means when it comes to deciding whether or not to purchase a pre-owned jet, you must:
“Look at a three- to five-year maintenance requirement and figure out what those costs are and see what you are going to have to invest in the airplane. You really need to do a maintenance projection and budget, and understand if that is something you can live with” – Nick Popovich of airplane reseller Colbri Aircraft
Each aircraft goes through a series of maintenance cycles where its equipment will need to be replaced. After usage and age, accurate logs and an experience aircraft-maintenance technician or management team can help you decide how long until certain parts have till needing to be replaced.
Questions to Ask About Aircraft Maintenance
Asking the right questions about aircraft maintenance will reduce the risk of purchasing pre-owned. Todd Weeber with Magellan Jets shares his Five Questions Everyone Needs to Ask About Aircraft Maintenance:
- How old is the plane (really)?
- Who maintains the airplane and more importantly, what percentage of the time are the mechanics directly employed by the owner who service the aircraft)
- How often does the mechanic inspect the aircraft?
- How often does the aircraft return to its home base?
- How well do the pilots and mechanics know their airplane? How many are assigned per aircraft?
- Understand what will be the 3-5 year maintenance requirements
- Have a maintenance projection and budget before you purchase to know the additional costs or ones to expect
- Always get a second opinion
- Request a pre-buy inspection completed at a certified 145 repair station
- Understanding the full costs of repair before purchasing, taken into account with the price, or completed before the purchase
- Do not leave the aircraft maintenance decisions for your pilot
- Consult your jet broker or management company their recommended mechanic, or consider keeping the current one
7. Review Records & Inspect
Buying a new or used jet requires research. A pre-owned jet will need complete records and logbooks, but remember as they say “the devil is always in the details”. Request the following documentation to go over them with an experienced airplane-maintenance technician, preferably your own with the previous mechanic. This will help you identify inconsistencies, missing records or logs, anything out of place, and have someone there to answer your questions so you can determine if they are accurate and reliable.
Make sure you receive all the plane’s logbooks and records:
- Airworthiness Certificate
- Aircraft Logbook and Travel Records
- Engine Logbook
- Airframe Logbook
- Equipment List
- Weight and Balance Data
- Damage History
- Maintenance Logbooks and Records (also the Provider or Contracted Employee/Mechanic that completed the work)
Also make sure they can provide you:
- All Current Parts or Electronic Warranties
- Placards and FAA-Approved Aircraft Manual
- Owner’s Manual
Review all documentation, records, and logbooks, to double check for consistency and authenticity. By going over with a trusted expert, they will help you identify anything that seems out of place or any red flags. Doing this alone or trusting someone else to do it for you is a gamble that puts you at risk of missing something small that could eventually turn into something big. Diligence is always the trusted way to mitigate pre-owned jet buying risk.
Everything looks good from the records and logbooks and are ready to purchase… but not yet! Never bank on anyone’s word – or their records and pictures for that matter – when buying a private aircraft. Always ensure you commission a Pre-Purchase inspection.
Make sure when you do this you are working with an airplane-mechanic that is familiar with your model. If you are unable to do it, make sure a qualified and trusted representative does so on your behalf with a qualified mechanic to complete a thorough pre-purchase inspection.
8. Finalizing Your Purchase
Once you or your purchasing representative has completed the final checks – visual, test flight, check log-books, consult the FAA, etc. – then it is time to make an offer.
Steps to finalize your purchase:
- Speak with your tax advisor or lawyer for paperwork to file or requirements to meet
- Issue Letter of Intent
- Put deposit in Escrow
- Get Aircraft inspected at an FAA licensed repair station
- Complete a purchase agreement outlining who is responsible for what
- Get repairs completed or terms and price updated
- Once everything checks, close the deal via Escrow
- Wire the funds to the title company
- Seller provides the bill of sale to close the deal
In most cases, the buyer assumes the cost for transporting the aircraft to the inspection. The seller is responsible to either pay for defects and repairs or to deduct the amount of these repairs from the price considered airworthiness issues. An example would be treating airframe corrosion, keeping in mind that a thorough inspection before your purchase will either save you on the price or from buying a headache.
Aviation Lawyer & Tax Advisor
Given the depth of tax planning and FAA compliance issues to account for, make sure to involve legal advisors during the sale. This will be in the form of qualified aviation tax advisors, lawyers well versed in aviation laws and regulations, and also an aviation insurer. This will help make sure you meet all legal and federal requirements for the sale and transfer.
If you need to secure financing for your purchase and there are a number of options available. According to Tailwind Capital group CEO Dave Cribbin “when looking into securing a loan to purchase a private jet, the standard terms are 3 to 5 years with loan amortizations of 15-20 years for newer aircraft and 10-12 years for early 1980’s vintage models. Prepayment penalties can also be included in the transaction and are usually 1% for the first 3 years, with standard legal fees being applied to any purchase.”
9. Secure Aviation Insurance
Once you have found the pre-owned private jet of your dreams, protect your investment by securing aviation insurance. We are honored to represent every A rated Aviation Insurance underwriter in the industry, as well as Lloyds of London and worldwide reinsurers. We have proudly helped private aircraft owners, corporations, airlines, DOD contractors, maintenance facilities, FBO’s, and aircraft charter fleets protect their investments since 1985. Recently ranked in the INC top 5000, we can help you secure an affordable insurance policy that works for you, your business, and secures your investment.
Becoming a jet expert overnight and purchasing alone is risky and can end up being costly. Working with an aircraft Management Company, Jet broker, or qualified buying consultant will ensure you make the right decision based on your needs. Working with an experience aircraft-maintenance technician that knows your model, will help identify red flags, and make sure they can help you go through records or logbooks where it’s relevant. If you are at the early stage, we are happy to recommend one of the many jet brokers or management companies we work with to help you through the process so you don’t have to alone.
We want you to be able to make the best investment when purchasing your pre-owned private jet. By empowering you with the information you need, we hope this article helps you make the right decision. Contact our team today about our aviation insurance policies or to discuss how we can help you, secure the right reliable private jet for your needs.