- 09 May 2023
- Brian Foley
- BizAv Market Insight
Market dynamics since 2008-09 have changed the way traditional buyers approach the business aircraft marketplace. Should you buy pre-owned or new today? Brian Foley shares the pros and cons of each in the context of the market.Back to Articles
At one time it was easy to predict who would buy a new business jet and who would buy the used one. Generally, those who previously bought new would buy new again, and vice- versa for the pre-owned buyer. More recently however, market forces have made that assumption much less reliable.
For many years a new aircraft buyer was analogous to a new car buyer. The driver with a brand-new Mercedes wasn’t going to go to the used car lot the next time.
Similarly, the value-oriented car buyer who looks for the low-mileage car that’s substantially depreciated isn’t going to justify paying a premium for a new car only to see its value rapidly depreciate.
Still, there are buyers for both new and used cars – and so it is in the private jet market.
There are several advantages, albeit with a premium purchase price, of buying new over pre-owned. First there’s the new airplane warranty that typically covers most items for the first five years.
This mitigates any unforeseen maintenance surprises which could prove catastrophic to the repair budget. A newer airplane also requires less scheduled maintenance generally, lowering its operating cost.
A new aircraft buyer also has the choice of how to configure and design their cabin, paint scheme, and can add other personal touches. That new airplane smell of leather and fabrics is fresh and distinctive. In contrast, buying a used airplane comes with whatever the previous owner personally thought was stylish.
A new plane will have all the latest updates incorporated, while offering an array of modern options to supplement the standard cockpit avionics and cabin features. It isn’t unusual for options to tag on millions to the base list price.
Traditionally, value and affordability have been the key motivators attracting buyers to the pre-owned market. Buyers can skip the steep depreciation curve that new airplanes see (which can amount to half of the original purchase price during the first five years of ownership).
Lower prices in the pre-owned market also allows buyers to purchase more airplane than they could otherwise afford, with more range and/or cabin size.
Going the pre-owned route could also get a buyer into a business jet much faster, since typical lead times for new airplanes are often 18 months to two years (and even longer for the newest models). And if the airplane has ‘good bones’ but looks a little tired, a new coat of paint and cabin refurbishment is always an option.
If the lack of warranty is a concern, the pre-owned buyer can always sign up on an hourly maintenance plan that covers things like the engines, systems and avionics.
And aircraft OEMs can offer a limited warranty on the pre- owned aircraft they’ve taken in on trade to facilitate a new sale. (However, their inventory is typically much more limited and priced a little higher for the OEM to be able to offer these types of ‘goodies’.)
The old adage of new buyers always buying new and pre-owned buyers always buying pre-owned was completely upended during the 2008-2009 financial crisis.
There was such a flood of pre-owned aircraft onto the market that at one point one in five of the world’s business jet fleet was available for sale. This oversupply caused pre-owned prices to plunge so far that it caused the traditional new buyers to at least consider pre-owned aircraft, purely from a financial standpoint.
Indeed, pre-owned buyers at that time had a bevy of lightly used late model aircraft to choose from that were still under warranty and priced millions of dollars below their factory-new counterparts.
More recently, the pandemic drove first-time users of private aviation to buy used aircraft since they were available for almost immediate delivery at a time when airline schedules were limited, and mingling with airport crowds an undesirable unknown. Only after the pre-owned inventory dried up did these new entrants look to new aircraft ownership despite the long lead times.
So, what’s the take-away for buyers in the market for a business jet today? Find out, and read about the latest trends in the market in the AvBuyer June Digital Edition by clicking the button below…