Less than half of business executives in a recent survey expect the global growth rate to increase over the next six months.
The current global economic downturn has caused many executives to take a cautious approach to their business. They’re looking for ways to cut expenses and just stay the course.
However, periods of slow economic activity hold opportunities if you know where to look.
Now is a good time to buy a business jet. A buyers’ market combined with the new realities of travel makes owning your own aircraft an attractive option. Find out more here.
The Trump Administration passed a tax reform package in 2017 that allows 100% bonus depreciation for assets like planes. After a business buys a private jet, it can deduct the full value of the aircraft from its taxes immediately.
The 100% bonus depreciation applies to new and pre-owned planes. This tax deduction may be large enough to cover most, if not all, of your tax liability. Buying a plane may be a smart move if you’re looking to increase your tax advantages.
Large Inventory of Used Business Jets
There is no shortage of pre-owned business jet inventory. Aircraft that are older than 20 years old, or are under the price of 5 million are selling much faster than in previous years. Private jet owners typically replace their aircraft every 3 to 5 years. Well-maintained planes can have a lifespan of 25,000 hours.
Just as mileage isn’t everything when buying a used car, total airframe time isn’t everything when buying a used aircraft. Nevertheless, a used jet can be a smart option.
Tax Cuts and Pre-Pandemic Economic Growth
The Trump Administration tax cuts lowered the cost of owning a business jet. Companies and people with a high net worth upgraded their aircraft, which has boosted the secondhand market.
A strong economy in 2019 combined with the Trump-era tax cuts means that many late-model aircraft are candidates or eligible for bonus depreciation.
Low Fuel Prices
The price of jet fuel is down nearly 46% from a year ago. This decline is a result of lower demand during the COVID-19 pandemic. Prices have begun to rise slightly, but they’re still much lower than average.
Fuel is your highest operating cost after you purchase your aircraft. When you buy a business jet now, you’ll have significant savings on fuel.
Lack of Commercial Flights
At the height of the COVID-19 pandemic in the US in April 2020, commercial flights were down 77%. Flights have started to rebound slightly, but the numbers were still down 43% in August.
If you need to visit production sites or consult with clients, you may not find a flight to fit your schedule. Also, the available flights often have layovers. Missing one leg can mean spending the night in transit before you can find another flight to your destination.
Many countries currently don’t allow Americans to enter. However, exceptions usually exist for people who own property or a business there. A private jet lets you take advantage of international access points.
Health and Safety
Even before COVID-19, many people had concerns about the cleanliness of commercial air travel.
Sanitary standards on commercial airlines depend on passenger cooperation. Local guidelines can vary, and vendors may or may not be compliant. Also, it’s almost impossible to follow social distancing guidelines in an airport.
With a private business jet, you avoid the hassle and risk of the airport.
A business jet lets you control your travel environment. This is especially important if you, a family member, or a colleague is in a high-risk group for COVID-19 infection.
Private jet terminals have been proactive in implementing increased health and safety measures. These procedures include masks and temperature checks for staff, removing magazines and newspapers from airports, and intensive cleaning measures.
Deciding to Buy a Business Jet
Now is an excellent time to buy a business jet. Several incentives, including low-interest rates and bonus depreciation, plus supply for most pre-owned aircraft, remain normal and balanced. The price of jet fuel is also low. You can travel safely and conveniently.
Here are some additional factors to consider as you decide if buying a private business jet is the best option for you.
You should be flying at least 150 hours per year to justify outright ownership. If you fly at least this much, buying an aircraft is likely to be more cost-effective than other options like chartering.
Find a Broker
A broker or transaction adviser is an important partner when you are looking to buy a plane. A broker will first help you determine what type of aircraft best suits your needs. The analysis includes:
- The distance you’ll be traveling
- Operating hours
- Number of passengers
- Cabin size
- Common destinations
- Contract negotiations
Once you’ve decided what type of plane you want, the broker will find business jets for sale for you to consider.
Knowing the history of a pre-owned plane is essential before you buy it. You want to know about any accidents or damage, its ownership history, performance specifications, and the retail and wholesale value.
A VREF Verified Value Report can give you this information and more. Like a CarFax report, a Verified Value Report makes you a more informed buyer.
Business Jet Ownership
The current global downturn is a good opportunity to begin or continue your journey as a business jet owner. VREF has the resources you need when you’re ready to buy an aircraft. If you need help, contact Jason Zilberbrand, ASA, for all of your appraisal needs.
Contact us to find out how we can help you take the next step.