January 23, 2021
Your Ultimate Guide to the Jet Buying Process
Find Used Jets for Sale on AircraftExchange
Buying a business jet is often compared to buying a residence, in part because the process is more complex than buying a traditional vehicle or other asset. As with home buying, purchasing a private jet requires a written offer, escrow account, inspections, and title and lien research and insurance.
Most aircraft buyers prefer to not handle this complex eight-step process independent of an industry expert, just as a home buyer may prefer to navigate the real estate acquisition process with a reputable real estate agent and brokerage. International Aircraft Dealer Association (IADA) Accredited Dealers are especially valuable resources for companies and individuals seeking to purchase a private jet. Their guidance can mean the difference between an ethical transaction and a frustrating experience.
IADA Accredited Dealers follow a specific closing checklist for all aircraft transactions, ensuring that due diligence is complete on all sides of the agreement, and you close the deal with an aircraft that not only meets your needs, but fits into your budget as well.
The Search for Private Planes for Sale
Your first step in purchasing a private jet is to find the perfect one. To do this, you must first create a list of the qualities you need in an airplane. Consider how many passengers you’ll need to seat, the range your jet must be able to fly, and the cost of operation you can budget annually.
Resources on AircraftExchange.com can help you make this list. Once you have your list created, an IADA Accredited Dealer will help you find a jet that meets your needs.
Entering into the Contract
If this part of the process of buying a private jet sounds a lot like a real estate transaction, that’s because these steps are essentially identical.
After you’ve found a jet you’d like to purchase, your aircraft dealer will compose an offer letter, which you’ll sign. The dealer will then send the offer letter to the seller or seller’s agent, where the seller will either decline or accept your offer. The offer letter will detail the required deposit you’ll need to make on the purchase; this money will be placed in an escrow account.
At this point, all parties will enter into a purchase agreement. Your agent will develop the agreement and send it to you for approval before sending it onto the seller and their agent as well. Once all parties have approved the agreement, the document is sent to escrow along with your deposit.
Business Jet Financing
Although not every organization must apply for financing to purchase a jet, some do. Securing business jet financing should take place after you’ve agreed to purchase the jet. Your finance company will need documentation about the transaction, including your purchase agreement signed by all parties, as well as documentation from your organization describing your financial qualifications for taking out a loan.
Essentially, the lender must be confident that your organization can afford to repay the loan. This is another aspect of aircraft sales that nearly perfectly aligns with buying a house.
Aircraft Insurance for Private Jets
Before your lender can close on your loan for an aircraft, you must provide proof that you’ve obtained an insurance policy - just as you’d have to do when buying a home.
You will need to purchase an insurance policy for your jet regardless of your method of financing. Aircraft owners must have insurance that covers the plane in the hangar, in the air, and on ground. Insurance also protects passengers aboard the plane. Your IADA Accredited Aircraft Dealer can help you identify reputable insurance providers who are part of the IADA products and services member list. These aviation service providers have been vetted by IADA for their capabilities, expertise, and history of customer satisfaction.
You will need to consider or purchase the following policies:
- Hangar insurance
- International liability insurance
- In-flight insurance
- Public liability insurance
- Passenger liability insurance
- Combined Single Limit (CSL)
- Aircraft hull insurance
- Crew coverage
Aircraft Sales Tax
Like an automobile purchase, you’ll need to pay sales tax on your used private jet. While the IADA Accredited Dealer you’re working with will facilitate the necessary paperwork, as a buyer, you will need to determine where you’d like to close on the jet and provide corporate documentation, such as articles of incorporation, as needed. Refer to your tax attorney or CPA for advice regarding sales tax.
Aircraft Pre-Purchase Inspections for Used Jets for Sale
A major purchase such as a used jet requires the buyer to do their due diligence in ensuring the plane is in suitable condition. This step is achieved through a pre-purchase aircraft inspection, or PPI. It’s ideal to begin preparing for the PPI during the purchase agreement phase of the purchasing process. Your agreement will include the scope of the PPI and conditions you can cancel the transaction if any issues are discovered during the inspection. You can request additional inspection tasks outside the scope of a regular inspection at this time; private aviation professionals will advise that a buyer requests a highly comprehensive inspection of older aircraft, one that was frequently exposed to harsh climates, or one with a history of damage.
As the aircraft buyer, you must determine where the PPI will occur - and selecting a neutral facility that does not regularly maintain the aircraft is in your best interest. The purpose of the inspection is to obtain unbiased information, and you are less likely to achieve this if a conflict of interest could be present. Request a quote from the inspection facility for the cost of the PPI. The buyer and seller will then need to sign the quote.
The seller usually pays for the airworthiness-limiting items of the inspection, while non-airworthiness items are generally paid by either party. The seller must deliver the aircraft and its records to the inspection facility. Both buyer and seller should have representatives on site during the inspection.
Upon PPI completion, the buyer will receive a summary of aircraft condition and status of airworthiness, called a discrepancy list. Should the inspection findings require remediation of issues, the seller and buyer, working with their dealers, should negotiate agreeable terms for purchase price or repairs. This is accomplished through a technical acceptance document (TA), executed by the buyer, and sent to the seller and escrow. Repairs must be completed before closing.
Meeting RVSM Standards
United States business aircraft owners and operators must comply with Reduced Vertical Separation Minimum (RVSM) standards. These standards require aircraft to be equipped with certain equipment, completing necessary training, and obtaining Federal Aviation Administration authorization before the aircraft can operate in RVSM airspace.
RVSM airspace regulations include where you can and cannot fly if your aircraft is not RVSM-qualified. Country-specific rules exist, which is why a private aviation expert, like an IADA Accredited Aircraft Dealer, can help you navigate the requirements you’ll need to meet with the aircraft you’re purchasing, particularly if your aircraft is traveling outside the United States.
To complete the RVSM portion of the purchase process, the buyer must request RVSM documents from an RVSM agent, gather the requested information, and return completed forms and documentation to the RVSM agent.
Closing and Escrow
Just as mortgage lenders, real estate agents, and title insurance companies prepare to close on a real estate transaction, there are similar steps that similar roles must complete during an aircraft purchase transaction.
Many of these steps are behind-the-scenes and don’t require the seller or buyer to do much of anything, except provide appropriate documentation where needed. These steps include conducting title searches, preparing documents for seller and buyer signatures, and cooperating with all parties involved to receive funding, and authorize insurance binding. Private aviation tax, title, and legal professionals will handle these items.
As a buyer, you will need to sign a registration application, participate in setting up IR, approving the pre-closing statement, send necessary funds to purchase the jet, authorize close, and sign related paperwork.
After closing is complete, the seller is responsible for transferring documents to you, the new owner. These include:
- Maintenance tracking
- Engine program
- APU program
- Airframe/Parts program
- Labor program
Your aircraft operations team must create new accounts for Navigation databases, charts, weather, Wi-Fi, and other programs installed in the aircraft.
International Sales Considerations
If conducting an international aircraft sale, there are extra steps in the process to complete. Your IADA Accredited Aircraft Dealer will ensure these go smoothly. Many of the extra steps are the responsibility of the escrow agent and a designated airworthiness representative (DAR).
As the buyer, you will be responsible for filing an Application Declaration of International Operations (DIO) with the FAA, applying registration letters to the aircraft, and purchasing a U.S. Customs sticker. If the aircraft is equipped with halogen fire extinguishers, the buyer may need to obtain a special export permit. At the first point of entry of the United States, a customs bond must be paid and filed.
Other steps in the international sales process include:
- DAR completes preliminary inspection of logbooks and tags to ensure conformity and no lifetime component issues
- Escrow agent prepares the DIO for Fly Wire and reserves the requested tail number
- Escrow agent confirms account is fully funded
- Seller authorizes de-registration to be filed. Bank funds must be released before filing de-registration.
- FAA receives and confirms de-registration just prior to closing
- File application DIO with the FAA
- Re-strap aircraft transponder/ELT with U.S. registration letters
- Apply registration letters to aircraft
- Receive Fly Wire
- Order and install navigation and charts
- DAR issues Certificate of Airworthiness
- Purchase U.S. Customers sticker and retain the receipt for flight
- Complete aircraft paperwork for exporting from the European Union
- Crew confirms databases after arriving for ferry flight
- Upon exit from EU airspace, the event is logged with the EU so the seller may be eligible for VAT reclaim
- Pay and file customs bond
Buying a Private Jet Through AircraftExchange
To locate the private jet for sale to suit your business needs and budget, your first step is to contact an IADA Accredited Aircraft Dealer. Accredited dealers and brokers promise efficient and ethical business transactions, as they represent only you and your interests. These reputable dealers offer their extensive private aviation industry experience and connections to aviation service providers that only decades-long relationships can provide.
You won’t regret placing your trust in an IADA Accredited Dealer when you purchase a used jet for sale. Find an IADA Accredited Aircraft Dealer near you, and see our dealers’ vetted and verified listings of pre-owned aircraft for sale on AircraftExchange.com.