2020 new jet deliveries were down 20% from 2019 (the lowest number since 2004), while pre-owned transactions were up 7.7% .
One of the biggest reasons for the popularity of the pre-owned market compared to new aircraft is the price difference. Depreciation has been a constant feature of aircraft since the financial crisis in 2008, and a pre-owned aircraft typically offers significant savings on the purchase price.
When you consider that many of the pre-owned models provide similar functionality to the new models currently in production (ie: pre-owned Citation XLS compared to a new Citation XLS+ or a pre-owned Global XRS compared to a new Global 6500), the value proposition of pre-owned jets becomes significantly greater than a new aircraft.
This proposition of similar utility for a lower purchase price has driven the pre-owned market’s popularity. To illustrate this point, of the top 20 best-selling jet types in 2020, 14 of these models were trading for under 2.5 million USD. Given that the lowest price for a new private jet (a single engine, light jet) is around 3 million USD, it suggests that many buyers are taking advantage of the value of pre-owned aircraft.
Another difference is the purchase cycle. New aircraft manufacturers will normally have pre-sold several months of their annual production quotas and as a result buying a new aircraft usually entails waiting several months for it to be built and delivered. Pre-owned aircraft have a shorter purchase cycle taking several weeks once the right aircraft has been identified. For clients whom timing of entry into service is critical, pre-owned jets normally offer a faster path to do so. This was especially true during 2020 where many new buyers wanted to have an aircraft to avoid airports and needed a faster entry into service than a traditional new purchase would provide.
Finally, it cannot be overlooked that the difference in size of the inventory available between pre-owned and new jets is substantial. Inventory of new aircraft available each year is determined by OEMs who, in general, try to keep a certain inventory level to maintain stability. As a result, new buyers have only around 700 aircraft per year to choose from. The contrast from the pre-owned market, which currently comprises over 20,000 jet aircraft and growing, is significant. The sheer size of the pre-owned jet fleet leads to a larger number of transactions each year as owners buy, upgrade or leave ownership.
This article was first published in our Fly-By Newsletter Issue 18. For market updates and more articles like this, subscribe to our newsletter and receive it directly to your inbox. Subscribe through the contact box below or at this link: Subscribe her
