So here are some tips and secrets. If you’ve been entertaining the notion of jet-setting in your private plane, we understand the appeal. You can avoid the lines, the wait, and the hassle of regular air travel. Just think, no more security, no more screaming babies, no more cramped seats. You get the picture.
Buying an airplane comes with a great deal of freedom and planning. Owning your aircraft, whether big or small, will allow you to travel to places you only thought were possible in your dreams.
Here’s an overview of some of the most important steps toward realizing your aircraft acquisition dreams.
How to Buy an Airplane: Important First Steps
Before you buy a plane, like any other big purchase, you should run through a quick checklist of priorities.
If you are a first-time buyer, have you thought about how you will pay for the aircraft? Have you spoken to your accountant and lawyer about setting up an entity to own the aircraft? Although opinions vary, you probably should have a lawyer involved from the start, more on that later.
Another significant factor is your budget. Buying a plane is a considerable investment. Go into the process with a number in mind, but also consider how you might be able to finance an airplane purchase.
Setting your budget may also help you decide whether you’re interested in purchasing a new or used plane.
You could also decide that fractional ownership is the better bet for you. Think timeshare, except for flying. With this option, you’ll have partial access and purchase of a plane rather than owning it outright.
So once you identify your lender or possible lenders, what next?
You’ll want to decide if you should go it alone or hire a broker. I will always advise you to hire a professional to represent your best interests. We call it a fiduciary, but how do you stay protected when no regulations are forcing that broker to comply with doing so? Remember I said to use a lawyer from the start, well this is a place where his or her contract review skills will pay off in droves. Just make sure you suggest to them that the agreement between you and your broker includes language preventing them from acting in anyone else’s interest other than your own.
Aircraft Acquisition Process Explained
If you ultimately decide you’re ready to go all-in and buy your airplane, these are the main phases of the buying and acquisition process.
Decide on the Right Aircraft
Thorough research is the first step toward narrowing your search. However, once you find an aircraft you like, make sure that you see it in person, get maintenance records, and know as much as you can about the pedigree, as you can find out.
Letter of Intent
Once you decide you’re ready to move forward with an offer, you’ll need to write a letter of intent that includes significant details of the proposed sale. Think of the LOI as a roadmap of the contract to be written and an outline of the transaction. If you want your LOI to be taken seriously, especially in markets that have few pre-owned aircraft available for sale, then you should open an escrow account. Having escrow clear title and hold funds is always a smart idea, plus you want someone making sure that title is lien-free, and sometimes it’s not, and sometimes it’s a real nightmare. So go ahead and open the account and send that LOI with a fully refundable deposit. I suggest an amount that would be considered a sign of good faith, so use common sense.
Finalize the Purchase Agreement
If the letter of intent and its terms are accepted, then you are ready for phase two.
You will also work with your legal counsel to finalize your purchase agreement. Purchase Agreements confirm the deposit amount, price of the aircraft, and other general sale terms like a pre-purchase inspection. The pre-purchase inspection or pre-buy is left to negotiations by the parties. Sometimes its an annual, or a set of recommended checks by an MRO. Other times, it can be a logbook and records review, or if it is “ass is, where is,” then you are accepting the aircraft in its current condition. Do not be afraid to ask for a higher cap to fix discrepancies, as many sellers will limit or attempt to limit this amount. You will also want to check those engines, and if not on an engine maintenance program, you should do power runs, borescopes, and soap tests before you commit to acceptance.
Arrange an Inspection Before Purchase
This inspection process is an important step to identify any shortcomings of the aircraft. If the report reveals there are reasons why a plane isn’t “airworthy,” this could create room for negotiating repairs or a reduced price.
Once you work out how repairs will be covered, a technical acceptance document is signed. At this time, the deposit becomes nonrefundable. There is no going back now, this is a scary moment, but if you trust your hired consultants, you are going to be flying your aircraft in no time.
Closing and Delivery
These final phases come with more details to work out, but it’s mostly the process during which a title is transferred to you, the purchase is officially closed and insured, and the plane is delivered to you. Since you are using a trusted escrow company, you won’t have much to deal with, but you need to read everything and prepare for the inevitable delay. Don’t push to close, and never agree to close until everything per that contract has been completed. If you want to avoid litigation in the future, take the time now to review everything and make sure you are not getting distracted by the emotions and excitement of a plane.
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The aircraft acquisition and ownership journey is an exciting and sometimes complicated one. However, we’re here to assist in the way.
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