Buying&Selling 2 DEC20.qxp_Finance 17/11/2020 10:32 Page 1
BUYING & SELLING AIRCRAFT
Should you buy a New or Used Private Jet? If you’re buying a business jet does it make sense to purchase one new from the manufacturer, or shop the pre-owned marketplace? David Wyndham considers the pros and cons of each option… f you are in the market to buy an aircraft and you know the make and model that you need, the next decision may be whether to buy new or used. While new models cost more to acquire than used, there is more to the financial decision than the cost of the acquisition. There’s also more to the value of what you get with new versus used.
I
Life-Cycle Cost and Net Present Value
Previously, I covered the financial analysis tools of Life-Cycle Costing (AvBuyer October Issue, p54) and Net Present Value (AvBuyer November Issue, p54). In brief, the Life-Cycle Cost takes the total costs into account, including the cost to acquire 54 Vol 24 Issue 12 2020 AVBUYER MAGAZINE
the aircraft; the costs to operate it (fixed and variable); taxes and depreciation; and the return of money as the residual value at the time of disposition. The Net Present Value calculations then look at when costs and revenues occur, and account for the time value of money or cost of capital. Those two can provide the financial best alternatives between new and used, as well as lease, finance, and purchase decisions. Each set of circumstances needs its own calculation, including tax ramifications. Given market depreciation over the last 12 years since the 2008 recession, a used aircraft can be acquired for significantly less than its new www.AVBUYER.com
w