People buy planes for various reasons. In adoption of such important decision on purchase can play a role of both emotion, and the logician. However, as well as in a case with any large investments, purchase of the private plane has to be thought well over and considered from several points of view. We talked to a number of experts in this area about what steps need to be taken for commission of such purchase.
For most of people it makes sense to employ team of people for participation in making decision on purchase. The broker or the consultant will direct process, the lawyer – to deal with contracts and other legal issues, the accountant – to give tax and financial consultations, and the qualified aircraft mechanic – to carry out technical inspections. These are key members of team.
This article has to help you to understand what to begin with, and also to bring to you the most common errors that you could avoid them. In general, purchase can borrow from several weeks to several months, depending on a set of nuances on each of the stages given below.
Before beginning to investigate the options presented at the market (where you risk to fall in love with the available planes), it is very important to carry out the careful and honest analysis. According to David Wyndam, the consultant of the Conklin & de Decker company, one of the most common errors of potential buyers by search of the plane is to regret time for drawing up the list of their own requirements to the plane. Your broker will have a number of various tools for assessment of your requirements. Also there are online tools – for example, programs of assessment of planes, and on the website of the Conklin company are the calculator of blowouts of CO2 and service of comparison of planes. It is necessary to consider the following factors:
Your need for travel.
For a start remember how many you traveled within the last 12 months: how often you flew how far and with what number of passengers? You flew from airport terminals or used smaller regional airfields? You flew on affairs? On rest? Both there, and there? Carried with themselves a lot of baggage? How these requirements will change in the near future? Any special requirements to the plane and its abilities or opportunities. It is necessary to consider all these factors.
It is important not to assume that one argument moved all others. Richard Hodkinson, the vice-president for sales and acquisitions of planes in the Clay Lacy Aviation company, considers the most common error of the clients that they too strongly concentrate on one argument for purchase, at the same time ignoring other requirements. For example, once a year you for a week fly to Hawaii to a holiday with ten members of the family. Within the remained year you usually fly alone or together on distance of several hundred miles. What plane you buy: big 12-seater which is too big for your daily requirements or small, and for a week trip to Hawaii you rent something more? Hodkinson advises to buy the plane which to us is necessary to 99% of time, but not remained 1%.
New or pre-owned.
New planes are more expensive, but by them the guarantee is provided. Besides, it is always pleasant to own something brand new. Old planes can be bought cheaper, but with age they can become much more expensive in service. There can be difficulties with search of spare parts for planes 25 years are more senior. The analysis of expenses of life cycle will help you to compare the general expenses on operation during the planned possession term, and also will allow to compare the new plane to second-hand.
Don’t think that the plane at the price of $4 million – by default the best option for purchase, than the plane at the price of $8 million. It is necessary to consider a number of additional expenses at possession of plane – at least, operation, annual service, storage and work of crew. Wyndam notes that in this case share owners often have advantage as they are usually best of all informed on (planned) expenses which accompany possession. He advises: “The plane is an expensive asset; it is necessary to force it to work for you”. Besides expenses, think of the income. Whether you will lease the plane? How you will be able to organize the investment work with benefit for the budget?
The following also belongs to budgetary questions: whether you plan pure purchase of the plane or purchase in leasing whether you will attract third-party financing or you will manage own means.
Comparison of models.
This aspect is also included into the following category therefore we will consider it there.
As a result of your analysis, you with team will make the list of brands and models which meet your requirements and the purposes. For each model in the list your advisers have to designate opportunities and advantages, strong and weaknesses, and also the expected expenses. Now it is time to look what offers the market.
“It is very important to investigate a plane origin before purchase”, – Hodkinson says. It isn’t necessary to rely only on stories of the agent of the seller. Their purpose – to sell, and yours – to be convinced that you buy the plane suitable you. You have to conduct researches further, than simple studying of the announcement. Begin with the simple desk research considering type of the plane which you look for, and your budget. After you outlined the approximate list, you can narrow it, studying an origin of planes. It is extremely important to receive the detailed magazine with transfer of all flights performed by plane, the made service, and also the one by whom and where it was made. Any missing or inexact information can reduce plane cost, that is you can face problems when decide to sell it later also.
By means of the team you conducted research and now are ready to make the proposal. Process of purchase can be long and difficult. At this stage high-quality financial and legal advice will help to protect you reliably.
Visit and visual inspection of the plane.
Don’t trust the text of the announcement. You wouldn’t buy the house without visual inspection, so don’t do the same with plane which costs several million dollars.
Letter on intentions. (LOI)
In it details about alleged sale – the price, the deposit sum, terms of sale, etc. are explained. It also has to contain expiry date of action of the offered transaction, giving you the chance to change the mind if something goes not so or the transaction will take more time, than it was expected.
Usually the advance deposit of 5-10% is paid to the broker or the eskrou-agent.
Check before purchase.
Your consultant can control it. Tim Barber, the senior vice-president of the Cabot Aviation company, notes that at this stage of process of purchase the skilled consultant can be a decisive link as he can notice details which otherwise could remain unnoticed. Don’t pass this stage and don’t try to cut off corners. The most important – to use services of the licensed aircraft mechanic (on the case and engines of the plane), and it is better to find someone who specializes in concrete model which you inspect. The inspector will provide you the list of shortcomings and misfits if those are available, and also can specify the cost of correction of each of them. This list is a basis for any negotiations regarding correction of shortcomings or reduction of price.
Contract of purchase
If you have no aviation lawyer yet, then most of brokers will recommend the lawyer who has experience with such transactions. All conditions, including the sums of purchase, the deposit, a condition of any compensations, terms for each stage, the place for pre-sale visual inspection, the statement and a guarantee, and also many other things will be listed in the contract.
It is carried out after conducting check and coordination of any adjustments or reduction of price. The buyer carries out technical acceptance, and after that the deposit usually isn’t subject to compensation.
Completion of the transaction and delivery
Completion of the transaction and delivery are the last stage, however and here it is possible to coordinate a lot more things. The ownership has to be transferred, and the plane is registered on the new owner, it is necessary to deposit money and then to translate them to the seller, the new owner has to insure the plane, and the plane has to be physically given it.
We congratulate! Documents are signed and certified by the press. Now you are a new owner of the plane, but a lot more work is necessary to you. The good consultant will tell everything and will prepare you for it. For example, the place of delivery of the plane and duration of its stay in this place can have tax consequences. You need to find crew and a garage and to solve who will watch plane and to serve it. If you have a good team of advisers, then everything will pass smoothly.
Find most expensive private jet on that web-site
Russia, St-Petersburg, Efimova 3.
US, New York, Plattsburgh.