Mesinger Pulse: New vs. Pre-Owned Gap Narrows for BizJet Buyers

Originally published as a blog for AINsight for Aviation International News on 5/7/21

At our company we are starting to see a very positive gap narrowing between the contemplation of buying pre-owned aircraft or buying new.  It has been over a decade now since the great recession, and many buyers have developed a very clear picture of the value of buying pre-owned over new in this period. This by the way is not to say that the OEM’s have not been having great sales years. They have. This is to say that now the delineation between new and pre-owned is shrinking and I think it can be traced back to several factors. One being that the opportunity to buy really good, late model, pre-owned aircraft is harder to accomplish, and the price between the two choices is narrowing. Take the Gulfstream 550 which is a very popular aircraft with high demand and low supply. In the last few years there has been a smaller number of 550’s produced, and those have been reduced even more by the special purpose designation builds, which have been a sizable percentage of new ones. This leaves very little choice at the top. This alone can drive a buyer to consider new as well as pre-owned.

This is very exciting for the manufacturers. Of course, it can be intoxicating for the manufacturers to consider ramping up production. Good news though, the manufacturers are both very smart and have great memories. They understand what can happen by getting out ahead of your skis with production and then having hiccups in the market that result in an oversupply of inventory.

Now let’s talk about the industry sales professionals like us, serving our buyer clients correctly so as to be able to properly support them when buying new. We are often in the background with our clients as they consider the new product. No different than the choice of buying pre-owned, there is the proper choice of which manufacturer to choose, as well as which model to focus on. Mission fulfillment is typically the deciding factor. But once the new aircraft is chosen the integral pieces of the puzzle must come into play.

We must be a total advocate for the client. There is the negotiation of the purchase agreement which has its own set of nuances from a pre-owned contract. Then there is the process of spec’ing the aircraft. Some buyers will want a very specific interior configuration and options package, and will not be swayed, however sound advice on the future residual value of these decisions should be given as some decisions can have significant economic impact in the future pre-owned market. Having skilled support is critical in this process as well as the completion process to ensure that all the components play well together, including the seats, paint and avionics all being installed with the highest degree of fit, finish, and functionality. Our firm has helped many clients in this process, and I can assure you it is a value add to their bottom line.

One must choose their advocate carefully so as to be confident they have a clear responsibility in this project shoulder to shoulder with you. After all, this same advocate who helped you buy should be there with you when it comes time to resell in the pre-owned market. This advocate should be able to answer back to you throughout the purchase experience, ownership cycle, and finally at the closing table when you sell it sometime in the future. As I often say choose your partners wisely. Choose one with the skillsets needed for these complex decisions. And then let’s put on our sunscreen and bask in the sun with our OEM friends!