How to Buy a Private Jet
Who wouldn’t love to own a luxury private jet? We take a look at what goes into buying one, what to bear in mind when shopping around for an aircraft that suits your needs and your budget, and how to make sure you’re considering all your options.
We’ll also briefly explore who some of the most influential private plane owners are, as well as feature some innovative uses for these kinds of aeroplanes that you might not have thought of before.
When is the right time to buy?
If you’re in the market for a luxury jet, the time to buy is now. According to Bloomberg, the luxury jet market is rebounding and there has been an increase in demand, which has partly been fuelled by first-time purchasers.
Even if you haven’t yet made up your mind whether to buy a private plane, you can start to explore the possibility by carrying out a cost-to-benefit analysis. The rule of thumb is that if you or your executives spend 350 to 400 hours in the air each year, then the expense of fully owning a private jet is probably worth it.
Part of this analysis is to get a general idea of the type of aircraft that would best suit your needs and your budget. This will not only give you an estimate of the initial outlay involved in buying a jet aircraft, but you’ll also begin to understand what it will cost to run your private plane.
Running costs include fuel, repairs and maintenance, insurance, airport taxes and landing fees, catering and flight personnel, along with the cost of layovers and stay-overs. You should also build a financial buffer into your costs, because these expenses can vary significantly from time to time with little or no warning.
If you don’t have a flight department to oversee the management of your jet aircraft, you’ll want to hire an aircraft management company. It will take care of pretty much everything to do with running your jet, from maintenance repairs to the hiring of pilots and onboard catering. Note that this cost varies greatly, depending on what type of aircraft you buy and what kind of service you are looking for.
How much does a private jet cost?
Most prospective buyers are probably not looking for the most expensive model in the world. For example, an Airbus A380, was bought and modified by Saudi Prince Alwaleed bin Talal al-Saud for $600 million.
At the other end of the spectrum, the Eclipse 400 is one of the cheapest jets on the market. It accommodates three passengers and a pilot, has a range of 2,326km and sells for around $1.35 million.
Midway between cheap and expensive is the bestselling Cessna Citation XLS+, at $7.1 million. Right up there with the most popular models in the world, the XLS+ carries eight passengers in comfort. It has a respectable range of 3,430km and 2.55 cubic metres of luggage storage space.
A handy tool to have on your desktop is an online aircraft cost calculator. This will give you a good idea of what the aircraft of your dreams will amount to, including running cost details based on actual use, as well as how financing, capital cost considerations, and residual value are likely to affect your operating expenses.
What to look out for when buying a private jet
Now that you’ve got an overview of some of the models out there and some of the costs, now is the time to get to grips with the specific jet you’re interested in. You’ve done your homework, at least in theory, but to avoid ending up with an aircraft that’s going to cause you problems down the line. You’ll need to employ the services of an aircraft inspector who has an impeccable reputation for thoroughness. Here’s what to look out for.
Know your aircraft
Speaking of maintenance history, it’s essential to find out which maintenance cycle an aircraft is in. Maintenance expenses, particularly the large ones, are usually incurred based on calendar and usage. This is typically the reason why two aircraft that are the same model vary (at times substantially) in price. You don’t want to spend millions on your jet only to find that two months after purchase it’s also due for expensive maintenance.
Insist on a pre-buy inspection
Just as you would thoroughly check out a car before making a purchase, make sure that you inspect the asset thoroughly before handing over your cash. You can do this by making sure a pre-buy inspection is carried out at a FAA-certified 145 repair station.
The only way to know for sure whether a plane is in good flying condition and worth the asking price is to have it inspected from wingtip to wingtip, and tail to cockpit. This includes a close study of all the flight logs and paperwork, as well as the engine programs and/or logs. It’s not only about catching those big-ticket maintenance discrepancies that could save you millions post-purchase; it’s more about your peace of mind when you fly.
Take it for a test drive (or flight)
Yes, as with cars, it’s worth getting a feel for a plane before buying one. Of course, this will cost you more than a tank of gas, but it’s worth it. If you’re thinking about buying your own private aircraft, you may well have spent a fair number of hours inside aeroplanes, so you’ll know what you like about a cabin and what you don’t. If you’re buying new, most manufacturers will provide demos around the airport area to qualified buyers.
Buying versus leasing
If the hours you spend in the air justify use of a private plane, but the numbers just don’t add up, you could consider leasing one instead. You’d be in good company – more than 33 per cent of commercial airlines lease at least one-third of their operational aircraft. This allows you to get all the benefits of owning an aircraft without the long-term financial responsibility. Leasing is also a great way for first-time buyers to try out ownership without being locked into a hefty financial commitment.
If you decide to go for leasing, you’ll have two options. The first is called “dry leasing”, which means you lease the aircraft but without pilots, cabin crew, or being responsible for maintenance or insurance. Dry leasing is typically used by people who need a jet for a longer period of time. The other option is “wet leasing”. This includes the pilot, cabin crew and various other costs, and is usually for a shorter time frame.
As you’d expect, both dry and wet leasing are less expensive than purchasing your own aircraft. This makes it an attractive proposition for a business owner who needs the speed, convenience and flexibility of private air travel while being able to enjoy greater liquidity in the long term.
Making use of sales brokers
Using the services of an aviation broker or consultant is highly recommended. They do charge a fee, of course, but if you’ve chosen a reputable one, they’ll expertly manage the purchase of your jet, and will be able to advise you about the ongoing operation of the aeroplane. Fees charged by aviation brokers are usually between 2 and 5 per cent of the purchase price. You can also pay a broker a set fee for an acquisition agreement, which most experts agree is preferable to have before proceeding with a plane acquisition.
Used versus new private jets
When you order a brand-new jet from a manufacturer, you will probably have to wait a year or two before taking possession of your plane. New planes are, of course, more expensive to buy than used ones; but on the flip side, they generally have a five-year warranty.
On the other hand, there’s a whole range of used jets on the market today, which means a greater choice of size and model, and more negotiating power when it comes to price. Be sure to check exactly where your jet’s been and what it’s been up to – especially if it has been used for private plane charter before.
Other options include fractional jet ownership or becoming a member of a jet card club, which offers you a range of benefits when you pay for private jet charter flights.
The private jet habits of the rich and famous
Knight Frank’s “Wealth Report 2021” predicts that the global population of UHNWIs (ultra-high-net-worth individuals) will grow by 27 per cent over the next five years, while the number of HNWIs – or millionaires – is forecast to rise by 41 per cent. As the ultra-wealthy and demi-billionaire count increases, the market for private jets and private plane charter is expected to grow, too.
Of course, besides those who can afford regular luxury private plane charter flights, there are those who have personal fortunes large enough to own a private jet. They will join the ranks of rich and famous high-flyers, including John Travolta, who is also a pilot himself (vintage Boeing 707, Bombardier Challenger 601 and Eclipse EA5000); Oprah Winfrey (Gulfstream G650); Tom Cruise (Gulfstream IV); Jim Carrey (Gulfstream V) Jackie Chan (Embraer Legacy 500 and 650); Jay-Z (Bombardier Challenger 850); and Bill Gates (Bombardier BD-700 Global Express).
Accessing financing
Lenders including Merrill (previously Merrill Lynch) and CIT no longer offer aviation loans, but there are still dozens of lenders to choose from, including Webster Capital Finance.
Typically, a standard loan agreement is between three and five years, with loan amortisations of 15 to 25 years on newer aircraft, and around 12 years for models that are around 30 years old. Please note, this is only an indication – the terms of a loan and interest rates offered will vary according to the model and condition of the plane, date of manufacture and its intended use. Keep in mind that you might be charged prepayment penalties of up to 3 per cent for the first three years, as well as standard legal fees.
Here, too, you can choose to go it alone or get the advice of a finance broker. Since financing is a complicated business, it makes sense to get the best advice you can, especially if your purchase is expected to amount to at least $1 million. A finance broker will take the time to understand your requirements and the financing terms that meet your objectives. They will also already know who to approach to get the best terms on a particular type and model of aeroplane.
Before going through with a purchase, you’ll also need to consult a tax attorney, as you’ll need the expertise of a professional to take advantage of the financial rewards that you’re potentially entitled to when buying a private plane. An aviation tax attorney will help you take care of all the tax planning, insurance and ICAO (International Civil Aviation Organization) or FAA compliance issues that come with your purchase before you can fly.
Buying a private jet – but not to fly
Yes, really! Building with planes is one of the coolest architectural trends out there. Complete aircraft, or their parts, are being used as homes, office spaces and even libraries! If you’re interested in living in a jet or using its parts to build something special, California is the place to go.
Aircraft “boneyards” are where retired planes go to wait out the remainder of their days in desert conditions (to minimise corrosion). Here you’ll be able to buy a jet whole or for spare parts. Aluminium fuselages are sold at a cheap price, so they make an excellent building material.
At Horizon Sun Charters we can help you in your journey of small aircraft purchase.
We offer over 100 years of industry experience in flying and maintenance knowledge. We can provide you with maintenance, operation and training support if necessary as we have an Approved Maintenance Organization “A.M.O.” and an Air Operator Certificate “A.O.C.”.
