What a Changing Preowned Market Could Mean for You

An unprecedented shortage of for-sale jets has overtaken the preowned market, leaving inventory at historic lows and leading some shoppers to buy new aircraft instead. 

The preowned aircraft supply is “tighter than we have ever measured,” says consultant Rolland Vincent, and according to transaction data firm JetNet, the percentage of in-service aircraft on the market (under 7.5 percent) represents “a two-decade low.” 

True, the shortage is partly a hangover from 2020’s breakout fourth quarter—which registered some 468 transactions versus 258 in 2019’s last quarter, depleting inventory, as Dennis Rousseau, president of Aircraft Post points out. But Global Jet Investor counters in its first-quarter report that the number of aircraft listed for sale this year has fallen 19 percent, to 528 units—“historically low levels.” 

In some market segments—long-range, large-cabin jets, for example—a shortage has been building for several years but “has become even more pronounced in 2021,” says Marc Foulkrod, CEO at brokerage Avjet, which specializes in the category. 

Super-midsize listings are similarly scarce. Steve Gade, aircraft sales director of Duncan Aviation’s aircraft brokerage arm, cites as examples the Bombardier Challenger 350 (with two for sale out of 372 in service) and Embraer Legacy 500 (three of 83). But the situation now spans all segments, with the Citations CJ4 (7/338) and XLS (9/326) among the hard-to-find light and midsize jets, respectively. The Phenom 300 and Pilatus PC-12 and PC-24 are virtually absent from the for-sale fleet, and if you’re looking for any late-model aircraft, “there is effectively no inventory out there,” advises JetNet’s vice president of sales, Paul Cardarelli.

Late-model Jets Were Already Hard to Find

Indeed, late-model jets were already relatively scarce, as manufacturers reduced production numbers in recent years, and some copies of some popular models were purchased for special missions, notes Jay Mesinger, CEO of Mesinger Jet Sales. For shoppers intent on owning a recent-vintage aircraft, the dearth “is driving them to the manufacturers,” Mesinger says, an observation echoed by other brokers. 

“We have discussions [with clients] about new versus used quite often,” says Foulkrod at Avjet. 

Adds Duncan’s Gade, “One can see that if a selection of near-new aircraft is not readily available, a purchaser with a predisposition to purchase a near-new aircraft may be compelled to purchase a new one.”

Further lubricating the skids for such deliberations, “The delivery schedules [for new aircraft] are very fluid these days and backlogs are much lower than in years past,” says Foulkrod. Manufacturers ‘have become much more flexible as well, and for immediate buyer needs, they can sometimes provide a demonstrator aircraft as a quick solution.”

As a capper, airframers “have been very aggressive in pricing, so as not to lose a sale, and that smartness and awareness of how to sell a new airplane versus preowned is working,” says Mesinger.

Indeed, Global Jet Investor reports business jet orders rose in the first quarter at major manufacturers.

When to Consider New Versus Used

The time to consider new versus preowned is at the start of your search, not after you’ve exhausted preowned options, Mesinger advises, and the vintage of aircraft and your budget will indicate whether a new model is an option. Prices of these in-demand preowned aircraft haven’t gone up—they just aren’t available. Expect a two- to three-year-old aircraft to be valued at some 20 to 30 percent below the price of a new model, says Gade. A four- or five-year-old could be depreciated in the range of 40 to 55 percent below new. If your budget can accommodate the difference, you are likely a candidate.  

A good broker can serve new aircraft buyers just as they do purchasers of preowned models, evaluating your mission and the aircraft that can fulfill it, in a consultant’s role. 

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“We know the products, we understand contracting strategies; the speccing, completion management, and building side; what equipment and avionics plays together; what percent of the fleet might have a forward rest area, and the impact on value,” Mesinger says. “We might go on demo rides and factory visits with clients.”

When it comes to comparing an available preowned aircraft with a new one, besides price difference and cabin condition “a buyer must do a deep technical dive into the maintenance status of the preowned aircraft,” Gade advises. “Specifically, the timing, scope, and potential range of cost of impending major inspections. This will both validate the comparison and provide the buyer with accurate expectations regarding the total cost of ownership.”

Foulkrod suggests “a long-term approach whereby the buyer should consider the new acquisition cost and the operating costs under warranty versus the used lower acquisition cost, but then include the paint, interior, and avionic changes and higher operating costs over the long term.” In some cases, “the new aircraft can be seen to be the more economical option.”

Either way, Foulkrod emphasizes, “Buying a multimillion-dollar asset needs to be a carefully calculated financial decision taking into account so many factors and variables specific to each buyer’s situation.”

The Shortage Has Aided the New-aircraft Market

Meanwhile, the shortage has restored some equilibrium to the new-aircraft market, where manufacturers have struggled to maintain pricing discipline through recent slack years but is not expected to increase list prices. “There are so many large-cabin offerings now, all competing for the same buyers, so I don’t think pricing power will be significant or last very long,” Foulkrod believes. 

Adds Gade, “There are still many good choices in the different segments of aircraft, so there will be competitive pricing pressures unless there is manufacturer consolidation.” 

Is the shortage a harbinger of a long-term drought?

“Expect inventory to increase to 8 to 9 percent as the year progresses,” says Cardarelli. “This will be stimulated by retirement cycles and exciting new aircraft programs like the G700, Falcon 6X, Global 5500, and even ACJ 220 that will compel owners to trade up to the latest and greatest.”

Adds Foulkrod, “I vividly recall being asked the same question in the summer of 2008 when there were two preowned GIVs for sale,” he says of the pre-recession era when demand raised the price of some low-time preowned models above the price of new. “A year later there were 30-plus for sale.”