Does buying an older airplane at the bottom-end of the market mean you will be its last owner? If so, is that really such a bad thing? Jet Tolbert contemplates…
While purchasing an aircraft that will be salvaged at the end of its operational life rather than being re-sold is not for everyone, some business aircraft buyers realize that obtaining an older jet or turboprop at a low price can mean capping their exposure to market depreciation.
When buyers of older aircraft play their cards right and plan their exit strategy properly, spending a minimal amount on an older aircraft offers certain advantages. But winning with such a scenario is far from automatic. Here are a few tips to help bargain buyers find their ideal aircraft.
Consider the Operating Budget
Before going through the time-consuming process of selecting the right serial number of an older aircraft, determine if the aircraft type will meet mission objectives within the terms of your annual budget.
An older aircraft may be purchased for a low price, but at the end of the year the cost of ownership could be much higher than anticipated because of higher fuel consumption, potentially higher maintenance costs and expensive upgrades.
Will an older aircraft necessarily end up costing more than anticipated in the long run?
Market depreciation, annual usage, efficiency and sometimes the cost of financing (assuming you can secure it on an aged aircraft) will heavily influence your analysis.
Do your homework to prevent nasty surprises.
Team-Up on the Analysis and Purchase
There are a lot of data to consider from market analysis, value analysis, operating costs and annual budgets, finance costs and more. Bringing a buyer’s agent on board to manage these analyses will alleviate the burden somewhat and ensure the information you receive is organized to support the decision-making process.
When selecting a buyer’s agent, avoid choosing anyone with a fundamental conflict of interest. For example, a buyer’s agent should be focused only on the brokerage of aircraft.
Otherwise their interest in dealer-owned inventory or other operational aviation businesses could create a fundamental conflict of interest at a crucial juncture of the process.
An appropriate agent should also have many years of experience with a deep well of industry connections and a reputation to match. He or she should provide information clearly and present details on all the available aircraft - both advertised and off-market.
When You’ve Found ‘The One’
After you have sorted through all your options of acceptable aircraft types with your agent and settled on a suitable model, it’s time to dig into the details and determine what will get the job done as intended and on budget.
There are many older aircraft at the lower-end of the market that are operating wonderfully and will continue to do so, but it’s important to avoid the ones that can consume your budget. The biggest deal-killers could be corrosion, large maintenance items coming due, compliance with mandates (i.e. ADS-B Out) or Airworthiness Directives.
In my experience, total time and cycles are not always as important for older aircraft as those parameters are for newer aircraft, thereby opening up more opportunities with more aircraft to consider.
Your team will be able to guide you specifically by collecting the data and presenting useful information for cost planning and exit strategy through resale or (worst-case-scenario) scrappage or donation.
This scenario is where low acquisition cost truly caps any market exposure. Know what mandates are due and that you have a plan for compliance at a reasonable cost. Furthermore, determine that the market exposure (vis-à-vis total cost including depreciation, maintenance, operational factors, etc.) is preferable to younger aircraft.
The Sum Value
It is quite possible that older aircraft can be purchased for very little cost beyond the value of their avionics and paint. When such an aircraft that satisfies your requirements is found, why not snap it up?