2021 brings a new era of first-time aircraft buyers.
The interest in purchasing aircraft has increased despite the adverse events following the height of the pandemic.
Suppose you are seriously considering making an aircraft purchase for the first time, congratulations! It’s always invigorating to see someone new enter the aviation community. However, it’s critical to understand the process might be more complicated and take more time than you may expect. Before you start the purchase process, it’s important to know how to buy your first aircraft properly.
How to Properly Buy Your First Aircraft
It is of equal importance that you avoid potential mistakes by purchasing an aircraft too quickly, from an unreliable seller, or without truly knowing what you will be getting into. Previous aircraft owners and industry experts may have the skills and know-how to deal with such transactions. But new buyers should also know the ins and outs of purchasing an aircraft for the first time.
Apart from becoming familiar with the purchasing process, it is equally important to have protections in place as a first-time aircraft owner. If you’re ready to aircraft shop, we’re more than happy to walk you through it. You can give us a call anytime at 844.303.VREF.
What You Need To Know Before You Buy
Owning an aircraft goes beyond the purchase. It extends to cover the meticulous maintenance and regular operations an aircraft requires. Before you buy an aircraft, consider your why and establish an actual budget you can stick to. It is not enough to assume that you can figure out maintenance and operating costs after you’ve closed the deal. Account for all costs before you buy to protect yourself from going broke and your assets from running dry.
As for your why think about your need for an aircraft; for example, if you travel consistently and your budget allows it, purchasing an aircraft might be right for you. Some benefits of buying an aircraft include the following:
- Increased privacy
- Improved time management
- More flexibility with owning rather than chartering
Steps to Purchase Your First Aircraft
There are a few things to consider once you’ve decided that you want to purchase an aircraft.
Decide On Whether You Want To Purchase A Pre-Owned Or Brand New Aircraft
Once you are sure that owning an aircraft works best for you and your lifestyle/business, pinpoint which type of aircraft you would like to purchase. Moreover, you should decide whether you would like to purchase one new or pre-owned aircraft. Just because an aircraft may be deemed pre-owned, it by no means is considered cheap or less competent than a new aircraft. You can get a great deal by buying a used aircraft. And you can potentially upgrade certain features!
Regardless of your decision, put yourself in good hands by having a comprehensive appraisal or valuation and pre-purchase inspection. We have plenty of resources to help you through this process.
A few things to find out when inquiring about pre-owned aircraft that affects its value includes:
- Age and hours flown over the fleet average (airframe hours)
- Engine hours
- Records and airworthiness memos and documentation
- History and damage history
Choose Your Aircraft Capacity
Depending on the number of people you plan on traveling with, you may need to up-size or downsize your desired aircraft.
3 To 5 Passengers
For a smaller passenger size, you may want to stick with a single-piston or one-engine light aircraft. These planes work well with smaller airports. They also make getting in and out of the airport quick and efficient.
Up To 8 Passengers
A multi-piston or two-engine light aircraft may be more your style if you need to take a slightly larger group with you. Both single and multi-piston engine aircraft are ideal for shorter, local trips.
You also have the option of looking for a turboprop engine that maintains a range of around 1,000 miles or about 2 hours of flight time.
7 To 9 Passengers
Try taking a look at a midsize aircraft. Full of luxurious options, even sometimes including a bathroom. Midsize jets can accommodate around 3 to 5 hours of flight time.
Up To 16 Passengers
Large aircraft offer generous amounts of space and luggage storage for a passenger load of up to sixteen people. And it is equipped for flights ranging from 6 to 9 hours.
You may also want to take a look at ultra-long-range aircraft, which offers an incredible amount of luxury and space. This aircraft is made for longer flights and can reach a maximum of 14 hours.
15 To 150 Passengers
A regional aircraft may be the best fit if you are interested in corporate and large group travel. This type of aircraft is best suited for short trips moving from town to town or city to city.
Finance Your Aircraft Purchase
There are a few ways you can go about financing your aircraft purchase by using a traditional or asset-based loan.
It’s similar to a car or home loan, just on a much larger scale. An aircraft loan can be set up to be paid over a set period of time. By opting for an asset-based loan, you secure your lending amount by placing assets up for collateral – which is ideal for business accounts. You can even visit the Aircraft Owners and Pilots Association (AOPA) website and use their calculator to get an idea of what financing for your desired aircraft looks like.
As soon as you have agreed with a seller or broker on a price for your chosen aircraft, you enter a period of escrow. This is when all transactions and documents are authenticated to ensure a successful closing.
Draft a Letter of Intent (LOI)
Once you’ve reached this stage, you are ready to make an offer. Here is what to include in your LOI:
- Purchase price offer
- Deposit amount into escrow
- Escrow agent
- Condition provision (ensures your deposit is refundable during the escrow period)
- Or an unconditional letter of intent (non-refundable deposit)
- Date of expected purchase
- Date of offer and purchase expiration
Following your LOI, you can expect negotiations as well as open discussions about your offer. After this stage, you will either have an acceptance or a rejection.
Determine Hidden Costs
As mentioned above, going through the escrow process does mean you will need to pay an escrow agent – one hidden cost you should factor into your overall budget.
Another option is to turn to a buyer’s agent familiar with the industry. This is someone you can trust to help you find what you’re searching for at the best price possible.
Next, you may need lawyers and the help of your accountants to get you through the process of purchasing and owning your first aircraft.
Then, there are other hidden costs and expenses – including insurance for your new aircraft, hangar fees, annual inspection costs, pre-purchase inspections, equipment costs, equipment operations, and maintenance costs. You will also have to obtain aircraft history, logbooks, and other reports.
Be sure to talk to those assisting you in your purchase to fully understand what kind of price tag you’re looking at when your transaction is complete.
Avoid Buying An Aircraft In Your Name
Consider looking into a corporate structure when purchasing your aircraft rather than placing it directly under your name.
Establishing a corporation or limited liability company (LLC) for your aircraft purchase can act as an asset in some states. Doing so can better protect you if something goes wrong. This could include the event of a major malfunction, negligence, or crash.
Seal The Deal
Once the terms of your letter of intent are accepted, and you’ve signed off on an offer letter, this is where your pre-purchase inspection will join the process.
Find a reliable mechanic who will serve as your expert eyes on the aircraft you would like to buy. If there are problems with the aircraft, this is when to negotiate or walk away from the deal. If you can reach an agreement, you will need to fill out FAA Form 8050-2 and get a sale bill.
Have patience, and you will eventually be the owner of your very first aircraft!
VREF Is On Standby
Now that you know how to buy your first aircraft properly, it’s time to take the first step. Explore VREF Online to discover the best aircraft for you.
As the official valuation directory and appraisal company for AOPA, we are glad to help you become an aircraft owner for the first time through our trusted and accurate aircraft valuation and appraisal services.
With over 30 years under our belt, we assist clients globally with honest and unbiased valuations, appraisals, and litigation consulting services. Contact us today to see how we can help you.