Three Mistakes Buyers Make When Purchasing a Private Jet

I recently met with a CEO of a construction company who was considering purchasing a private jet.  He explained that he had found a couple of good deals on the Internet and wanted to get my thoughts on them.  I began politely outlining the process of buying a private jet—beginning with an analysis of his travel needs to help determine the aircraft requirements, such as size, range, performance, number of passengers, etc.

It was clear that the CEO was not interested in discussing the process and instead kept pressing me for my opinion.  When I told him that the aircraft he was considering were probably overpriced and most likely the wrong choice for his needs he got upset.

The CEO was about to make a mistake that I repeatedly see buyers make. In this article I will review three of the biggest mistakes buyers make and give you some ways you can avoid them.

Mistake: Purchasing the wrong aircraft

The biggest mistake I see buyers make when purchasing a private jet is to buy one that exceeds their needs. This usually equates to buying a larger aircraft than they really need.  A large private jet costs more to purchase and operate compared to a smaller aircraft. Larger aircraft have bigger engines, they use more fuel, require more maintenance, need bigger hangars and cost more to insure. I recommend that buyers fully understand their requirements and buy the smallest aircraft that fits.

Expert Tip: Ask yourself if you really need a large aircraft.  Use the 80/20 rule to evaluate the aircraft to purchase.  Identify a private jet that meets roughly 80% of your travel requirements. If you have outlying travel requirements, say a trip to Europe once a year, consider using another form of private aviation, such as, fractional ownership, a jet card, or private jet charter to manage the remaining 20%.  This rule eliminates the outliers and ensures that the aircraft you choose is the best match for your core travel requirements.

Another mistake buyers make is purchasing an aircraft which doesn’t meet their requirements in some way.  For example, purchasing an aircraft that has limited range or poor runway performance.  Private jets are getting bigger to carry the fuel required to connect business centers around the world.  I have seen several recent instances where a buyer purchased a long-range private jet that couldn’t operate from their airport due to a weight restriction.  The aircraft couldn’t take on enough fuel to go the distance without exceeding the certified ramp weight at the airport.  Talk about buyer’s remorse.

Expert Tip: Use a jet card or charter a private jet to try an aircraft before buying it. This ensures that the aircraft meets the buyer's needs and goes a long way to eliminating any surprises. Have a trusted advisor create flight plans into and out of the airports that the aircraft will frequent to understand how it will perform under various conditions, such as, hot days, or in wet or winter conditions. Get to know the fixed based operators at the airports. Ask about their hours of operation, ramp and weight limitations, fuel and hangar availability, ground power, maintenance, and de-icing capabilities. Take this information into account as you make a final decision and eliminate any aircraft that doesn't fit.

Mistake: Not performing a prepurchase inspection

In my experience, there is no good reason for a buyer to give up their right to inspect an aircraft before purchasing it.  I’ve heard all the excuses—It’s a sellers’ market; we have another buyer that will accept the aircraft as-is; it will be delivered with all the maintenance completed; the seller is in a hurry to close—the list goes on and on. But it is a mistake for a buyer to waive their right to a prepurchase inspection, or more commonly, accept a reduced work scope, or more limited inspection.

Wear and tear of an aircraft and components occur due to thermal cycling, environmental forces, and aerodynamic stress.  Detecting this damage requires specialized tooling and many years of experience evaluating and maintaining similar aircraft. The cost of a prepurchase inspection will always be less than the replacement cost of a major component or repairing substantial damage found after the sale.

A buyer has a right to perform the necessary due diligence before the purchase to ensure that an aircraft is not damaged and that it suits their needs. This is known as the caveat emptor principal, which is a Latin phrase meaning, “let the buyer beware.”

Expert Tip: Always insist on a prepurchase inspection by the original equipment manufacturer or other top-tier maintenance provider that has the experience maintaining similar aircraft. If a seller pushes back, consider it a red flag—Let the buyer beware.

If a private jet is listed for 5% over its real value how would you know?

Mistake: Purchasing an aircraft directly from the Internet

The Internet is a great place to browse private jets for sale.  Buyers can evaluate the various models, cabin layouts, passenger amenities and other options. But internet listings don’t always provide the information a buyer needs to make an informed decision.  For example, the value of the aircraft compared to its peers, or how long it has been on the market, or the reputation of the listing broker.

Here’s a question—If a private jet is listed for sale for 5% over its real value how would you know? To answer the question, you need additional data.  First, you need to know what similar aircraft have sold for in the current market and secondly, you need to calculate the maintenance exposure or liability of the specific aircraft relative to its asking price.

Maintenance exposure is the amount of maintenance costs that have been accrued at any point in time. For example, let’s say an aircraft’s engines have an overhaul requirement of 5,000 hours which will cost roughly $1.2M dollars to accomplish. If the aircraft has 2,000 hours on the engines, or 40% of the overhaul limit, then the maintenance exposure is 40% of $1.2M or $480K dollars.  But if the engines have 4000 hours, then the maintenance exposure would be 80% or $960K dollars.

If you apply this methodology to major airframe inspections, landing gear, cockpit windows, interior refurbishment, and other time-limited items, you'll get a much clearer picture of an aircraft’s true value.  A lot of buyers are unaware of these costs and end up paying a lot more than the aircraft is worth.

Expert Tip: Buyers should have a trusted advisor help them evaluate any aircraft they are considering buying.  Have the advisor calculate the maintenance exposure of the aircraft to get a clear sense of the ratio of the maintenance exposure to its asking price then compare the ratio against several of its peers—the results may surprise you.

In Summary

There are several common mistakes buyers make when they buy a private jet.  They include not clearly defining their requirements, forgoing, or limiting their rights to a prepurchase inspection and purchasing an aircraft without the help of an advisor with the skill to evaluate maintenance exposure and other technical criteria.  But you can avoid these mistakes if you know your requirements, do your due diligence, and ask for help along the way.  This is a tried-and-true process that helps ensure you buy the right aircraft at the right price.