Your Guide To Buying a Private Jet
Have you ever dreamed about owning your own private jet? You may believe this is just a pipe dream that could never come true, because the aircraft are just too expensive to own and operate. However, thanks to the way there has been greater demand for private jet charter and private air travel, it has also become a lot less expensive comparatively.
As a result, there are greater opportunities that make owning an aircraft. In the following post to help you understand what’s what, we are going to look at everything involved in buying a private jet. You’ll discover that there’s more involved that simply paying the purchase price.
Should You Buy That Private Jet?
If you really want to buy a private jet, there’s no better time than now. The cost of these exclusive aircrafts has not really increased to the prices they were before the economic problems the world experienced in 2008. Consider the findings by Bloomberg. During 2018, the cost of a used private jet had increased by a noteworthy 1.5%. That meant the price tag was around the $9,700,000 mark. The price shift was due to the US’s reduced corporate taxes and the favorable growth the business world was seeing.
If you’re still not sure whether you should buy one or not, a good way to determine what you should do next is by conducting your own cost/benefit analysis. Generally, if you and other members of your corporate team are spending between 350 and 400 hours flying yearly, then the cost of private jet ownership is worth spending.
A crucial part of the cost/benefit analysis involves determining the kind of jet/aircraft suitable for your budget and requirements. As well as helping you have an average price mark in mind, it will also help you to appreciate the expense involved in operating and using your private aircraft. The operational expenses includes the fuel, maintenance, repairs, landing charges, airport taxes, insurance, in-flight personnel, catering and any related costs for layovers.
Ideally, you should plan a buffer zone to cover these ongoing costs as they can change dramatically at the drop of a hat.
Depending on the size of your business, you may not have a dedicated flight department who’ll take responsibility for aircraft management. Therefore, it’ll be wise to look for a suitable out-house aircraft management firm. Their job will be to oversee the operational aspects of your plane, including maintenance, repairs and arranging for the in-flight catering and even the pilots. The average aircraft management service costs around $250,000 per annum.
What Will You Need To Pay For A Private Aircraft?
The chances are, unless you’re a multi-millionaire or royalty, it’s unlikely you’ll be looking to buy a private jet with an incredibly high price tag. For instance, the image above is Alwaleed bin Talal al-Saud, a Saudi prince’s Airbus 280. This cost a staggering $500 million. Not all are quite as pricey as that, as one of the least expensive jets in the world is the Eclipse 400, which has enough space for a pilot and three passengers. It costs just $1,200,000 and can fly 1,256 miles non-stop.
If you’re looking at a happy medium between luxury and budget-friendly, there’s the extremely popular Citation XLS. That plane can carry eight passengers comfortably, can fly across 1,850 nautical miles non-stop and even offers a generous 90-cu ft in storage space for luggage.
Things to Consider When Purchasing Private Aircraft
If you’re ready to take things to the next stage and have a specific model of aircraft you’re keen on, there are things you need to consider. Even if you’ve done a lot of researching on your own, it’s recommended you avail yourself of the help of a qualified aircraft inspector. Things you need to consider when you’re buying a private aircraft, that an inspector should know to look at, includes:
Knowing the Plane Inside Out
You need to know more about the plane than just the seat finishes, performance, specs and cabin width. Although they’re important, there are other crucial elements too. It’s very similar to looking at buying automobiles. Just as won’t want to pay for something that’s been used repeatedly by a rental firm and that’s been left out under the sun, you want to avoid aircraft that’s been left in a similar way.
Similarly, you want to make sure whoever has flown the plane before you has taken care of it and this kind of information can be found in the logs for the jet.
Understand the Aircraft’s Maintenance Cycles
You need to understand the maintenance cycle the aircraft you’re interested is in. The larger expenses for jet maintenance are normally charged to it based on the usage and calendar. Which is why you’ll come across two jets that have different price tag even though they’re the exact same model. For example, you want to avoid spending $4,000,000 on an aircraft, to find out later it’s just a couple of months away from maintenance costing between $250,000 and $500,000.
Always Arrange for a Certified 145 Inspection Before Buying
You need to make sure the aircraft you’re interested in is inspected thoroughly at an official 145 repair center. There’s no other way of knowing whether the jet is worth the price tag or is in good flight condition unless you have it checked over by an expert, from tip to tail, inside and outside, bottom to top. As part of this, the paperwork and flight logs will be thoroughly inspected too.
Book a Test Flight/Drive
Another thing that makes buying a plane like buying an automobile is you should base your decision to buy an aircraft not just on the facts, figures and how it looks, but how it feels operating it too. Get yourself a test drive or flight. This is quite a considerable cost; it must be said. But, when you’re already forking out a lot of cash for something, it makes sense. There are some manufacturers, if you decide to buy a brand-new jet, who will offer you test drives and demonstrations around or close to an airport, if you’re qualified.
New Vs Used Private Jets
If you’re in the market for a private jet, you need to make a choice about whether you’re going to invest in a used or brand-new model. One thing you need to bear in mind is although brand-new models will be pricier, they often come with full warranty coverage from tail to tip for five years and a full checkable history.
Alternatively, there’s a wide variety of used private aircraft available these days, meaning you have a greater variety to choose from when it comes to model, sizes and you even have a greater chance of getting a better price.
Leasing Vs Buying a Jet
It may be worth giving serious consideration to leasing if you do spend enough hours flying from one destination to another, but you find the math doesn’t work out. This is quite a popular option for many companies, as over 33% commercial airlines tend to lease out around 1/3 of the jets and aircraft they have in use. Leasing is ideal because you get the advantages of buying a jet, but don’t have the burden of a long payment plan.
If this is the first jet you’ll be buying, leasing means you can see if owning an aircraft is right for you without requiring such a huge investment upfront.
When you’re looking to lease an aircraft, you have two different kinds you can go for – dry-leasing and wet-leasing.
Dry-leasing – this leasing involves the jet but you don’t have responsibility over the insurance and maintenance and don’t get a cabin crew and pilots for the price. It’s designed with jet users who need it for longer periods of time.
Wet-Leasing – involves the jet, cabin crew, pilot and everything else you’d expect and is designed for people who don’t need a jet for very long.
Regardless of which you choose, leasing is cheaper than buying.
As we know only too well the hassle that can come from owning your own aircraft and the expense of travelling regularly by air. That’s why we provide tailor made private aircraft leasing options, that gives you the access of a jet anytime you need it without all the extra fuss.
How To Get the Finances for Buying a Private Aircraft
Although in the past you’d be able to get a loan to help buy a private jet from companies like Center Capital Corp, CIT and Merrill Lynch, they don’t offer those kinds of financial products anymore. However, all is not lost as there are various other financial companies out there who still do.
Generally, you’ll find that a basic loan lasts from 3 to 5 years. You’ll possibly be able to secure a loan that involves the payments being spread between 15 and 25 years for brand-new or at least, close to new jets with 12 years on average being the length for loans on aircraft as old as 30. Be aware, though, that this is only an estimation and these figures should therefore be used just as a guide. There are various aspects and factors that will have an impact on the interest rates and terms offered for a loan, including:
- Jet make and model
- Date the jet was manufactured
- Jet’s condition
- What you intend to use it for
You also need to remember that you could face prepayment charge penalties as high as 3% during the first 3 years along with the basic legal costs.
It’s up to you whether you want to try and arrange and negotiate financing your private jet purchase on your own or with the help of an expert like a broker. Keep in mind, buying a private aircraft is more complicated than other purchases, so it may be in your best interest to seek out as much qualified and experienced help and advice as you can get. This is especially important if you know it’s going to cost you around $1 million. Financial brokers are experts in their field and if you choose to do business with a reputable one, they’ll get a firm understanding of what your requirements are and determine the terms for financing that are going to best meet your needs.
In addition, you need to hire a tax attorney to give you advice on your prospective private aircraft purchase. Although this has always been advisable, it’s even more pertinent after changes were made to the tax code. These changes provided incentives to buying private jets. In order to benefit from the rewards you may be eligible for, you need the help of a professional tax lawyer who can help you with the FAA compliancy issues, insurance and tax planning associated with your private aircraft purchase, so that once the deal is complete you’re free to enjoy taking to the skies without worrying about anything.
Take Advantage of The Services Offered By Private Aircraft Brokers
Following the above about private aircraft brokers, we’d highly recommend that you avail yourself of their services. Of course, their services don’t come for free, but it may be worth it to have someone who knows what they’re talking about and who understands the industry on your side as you move to purchasing that aircraft of your dreams. They tend to charge around 2 to 5% of the sale price of the aircraft. One option that has become very popular over the last few years is buyers paying their brokers a pre-agreed Acquisition Agreement fee. This is normally anything between $25,000 and $150,000. Aviation industry experts recommend that this is the best course of action.
Who’s Who of the Celebrity Private Jet Owners
According to The Wealth Report 2018 from Knight Frank, the percentage of people who are considered ultra-wealthy (i.e. who have a net worth of over $50,000,000) will increase by 43% from 2017 to 2022. Whereas the percentage of those considered to be demi-billionaires (i.e. those who have a net worth of over $500,000,000) will rise by 39% during that period.
What does this mean for the jet charter industry and private jet market? It too will experience growth with greater demand from people for access to or ownership of their own private aircraft.
New demi-billionaires and ultra-wealthy individuals who buy jets and private aircraft will take their place in that special list of the celebrities who already do, including:
- Bill Gates (Bombardier BD-700 Global Express)
- Jay-Z (Bombardier Challenger 850 Learjet)
- Jackie Chan (Embraer Legacy 650)
- Tom Cruise (Gulfstream IV)
- Donald Trump (Boeing 727-23)
- Oprah Winfrey (Bombardier Global Express XRS)
- John Travolta (Boeing 707-138, Lear jet, Gulfstream)
How About Owning a Private Aircraft, But Not Flying It?
Although it may seem a little strange, there has been a growing trend in recent years for jets in their entirety or specific parts being used as various types of building structures. Whether it’s offices, homes or libraries, the one place you need to go to for this kind of architectural project with an aviation theme is California. There you’ll find a plethora of aircraft and plane boneyards, i.e. places where abandoned and decommission jets go to live out the rest of their years. Corrosion is kept to a minimum thanks to the desert conditions.
From there you can buy complete jets or just spare parts. As aluminum fuselages sell for very affordable prices, they’re the perfect choice for interesting building materials.
Perhaps you’ll follow in the footsteps of Joanne Ussery from Mississippi who purchased a Boeing 727 rather than forking out for a traditional home. She was driven by the need to have space and not much to spend. The plane itself cost just $2,000. That covered the hull, while it cost a further $4k to transport it to its new home and then $25,000 to refurbish it. The stunning property is now complete with a master bathroom and Jacuzzi, laundry room, kitchen, living room, three bedrooms, electricity and hot water.
The best example of converting a private jet into a home is located atop the Malibu hills. Eco-friendly and ingeniously designed, the 747 Wing House was designed and built by David Hertz, an American architect.