Determining the Right Jet for You: Budget

Determining the Right Jet for You: Budget

February 12, 2016

Choosing the right aircraft can be an incredibly overwhelming process. There are over 200 different models of private turbine powered aircraft, all of which have their own attributes, characteristics, pros and cons. We will look at a few things you should consider when starting this exciting process, beginning with one of the most important factors: your budget.

Understanding how much you can spend is one of the vital metrics in selecting an aircraft and should be looked at with care and consideration. Keep in mind that selecting an aircraft that is right for your budget involves more than just looking at the purchase price.

In today’s world, operating costs can often represent a larger financial commitment over the life of the aircraft than the purchase price. This is a key consideration that is often overlooked as people enter the market. The cash flows for purchase and sale are only at the beginning and end, but operating cash flows are continuous throughout. Therefore make sure that the aircraft you select will be a suitable asset for you throughout the ownership cycle.

While awareness of your budget is important, we often discuss with clients that paying slightly above your budget for a higher quality aircraft can be a worthwhile trade off. Sometimes an aircraft slightly over your budget may be a better value, and it is good to know if exceeding your budget is even a possibility. Budget creep can be a powerful phenomenon, so do an internal review to see if this is something that you are happy to entertain.

Also, be aware that price and value are not the same thing. Warren Buffet’s now dogmatic quote that ‘price is what you pay, value is what you get’ is never more true than in aviation. Many a buyer has fallen in love with an aircraft’s low price to only end up regretting that siren’s song. A low price is a one-time event, but low quality lasts for years. Recognize what is determining the price difference in quality. One of the results in the large depreciation of the last years is that older aircraft will vary widely in price and quality. Having a better grasp as to what is driving these price swings will help you figure out what compromises you are happy to make.

Lastly, understand if you want to finance the purchase of the aircraft. Arranging finance can take an extended period of time, and forward planning is crucial. Keep in mind that the bank will have their own requirements and perceptions of quality and will have their own needs in the transaction. They are, in effect, a partner in the purchase and their needs have to be considered and integrated into the equation.

Many times, financially strong clients will have access to enough funds from financiers to purchase most any type of aircraft. Just because that amount of financing is available does not mean it should be taken. Finance always has to be paid back, and we have seen owners falter over time with unexpected downturns in their business that were made harder to endure because of high finance amounts on their jets.

The main summary here is that budgeting is more than just the asking price. It involves a plethora of factors to consider and should be thought of throughout the entire projected ownership period. Aircraft are wonderful and amazing machines, opening up endless amounts of possibilities and will quite literally eliminate huge amounts of wasted time. But they are expensive. Proper budgeting throughout the cycle can help make sure that it is the asset that works for you, and not vice versa.

 

Blogs are written from real world experience by Colibri Aircraft’s individuals. If you have any questions or comments about the topic of this blog, please feel free to contact us at enquiries@colibriaircraft.com