Steve VarsanoFounder at The Jet Business

Why do billionaires buy used private jets?

Name: Why do billionaires buy used private jets?
Uploaded: 2023-08-07T19:07:56+00:00
Duration: 1 min 4 s
Channel: Steve Varsano
Description: In this explanatory segment, the speaker outlines why ultra‑wealthy individuals often purchase pre‑owned private jets instead of new ones. The main…

7 Aug 2023 · 1 min

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1:04

In this explanatory segment, the speaker outlines why ultra‑wealthy individuals often purchase pre‑owned private jets instead of new ones. The main reasons are: (1) immediate availability—new aircraft can require 1 to 2.5 years to be built to custom specifications, whereas a used jet can be delivered right away; (2) depreciation behavior—aircraft are typically depreciating assets, but a COVID‑induced supply shortage temporarily pushed prices up, an anomaly in the roughly 60‑year history of the market; (3) cost advantage—older jets (2‑15 years old) perform similarly to new models, and buying them at a substantial discount (often half the price of a new jet) offers a compelling financial case, even if they may lack the latest avionics or cabin features. The speaker frames these points as a persuasive sales narrative for used jets.

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If you're really super rich, why would you buy a pre-owned aircraft? You could say the same thing about somebody who's not so rich but fairly well-to-do and they buy a used car. Sometimes you want immediate satisfaction, and if you want immediate satisfaction, you can't buy a new aircraft because it could take 1 to 2.5 years to actually order an airplane and get it manufactured and delivered the way you wanted it custom made. But the other thing is, like a car, an airplane is normally a depreciating asset, and once you buy it and you take it off of the showroom floor, if you want to call it that, the price will depreciate. Of course, in the past year, because of COVID and because of lack of supply, prices actually went up instead of going down, which is a real anomaly because in the history of aircraft, that's never happened, which is about 60 years. But this is the first time it did. But now the market is leveling off. And if you could buy an aircraft for a significant discount, if it's 2, 3, 4, 5, 10, 15 years old, it does exactly the same thing as a new one. Maybe you might have newer avionics, which are the radios in the cockpit, or it might have a different cabin altitude. Food or something like that. But if you could buy something half price off of a new one, that makes a very convincing sales story.