Sifting through the industry hype, Jet Tolbert makes sense of the used jet marketplace moving into Q4 2018. Are buyers or sellers justified in their expectations? Or is reality to be found somewhere in between?
There are many buzzwords being liberally banded around the Business Aviation sales arena at present. Terms like ‘100% bonus depreciation’, ‘active market’, ‘low inventory’, ‘strong economy’ and ‘strong dollar’ are all commonly heard.
I could, of course, list many more that describe a used aircraft marketplace in which good quality jets and turboprops are getting scarce and buyers are abundant. But given all of the hype, are sellers making a sincere effort to make buyers aware that the opportunity available to them is limited as a result of competition from other buyers?
Or are they trying to leverage these oft-heard buzzwords to hype the sale of their jet, and squeeze as much out of the buyer as possible?
From where I’m sitting, the answer is ‘both’. The clichés that sellers throw around might seem like a hard sell, but genuine buyers are finding there’s plenty of competition for a purchase, forcing them to either step up and meet a seller’s expectation, or stand-by while other buyers make strong cash offers, risking their own opportunity to purchase.
In years past, buyers were looking to purchase aircraft at tomorrow’s prices while sellers held out for yesterday’s values. Today the roles have reversed and there are even some instances in which sellers expect to achieve a sale price that is beyond what the market will bear.
What This Means to Buyers
Now, more than any other time in recent market history, buyers need to be in tune with the sellers on the market. This is ultimately achieved either by having a close and honest relationship with the seller’s representative or hiring an acquisitions agent who is very well attuned to the market.
If you select an acquisition agent, you should ensure the relationship allows for an open flow of information about recent market activity and that you trust their perception of the market.
An inside track on recent market activity will prove invaluable to help ensure you do not pay an unrealistic seller what they are asking, or lose out on a good acquisition to another buyer who is willing to pay that little bit more.
What This Means to Sellers
Alternatively, if you are a seller, there is much to be said about ‘cash-in-hand’ offers. No one is truly able to predict the future value of your aircraft, so an offer received today may be the best you receive – and is worth your consideration.
While it is true that premium aircraft will see offers that can be considered ‘strong’ in today’s market, you will more likely find a large majority of buyers level-off in the same general pricing area.
That’s not to deny that there are still the ‘one-off’ sales that occur – but waiting for an offer of this calibre can be a gamble when you consider the impact of depreciation and maintenance costs that occur to your aircraft in the meantime.
Today, possibly more than ever before, it’s important to trust your counterparty when contemplating an aircraft transaction. Considering how many different sellers there are in the market, the better option would be to have a well-established, experienced broker for your acquisition agent who has deep connections.
This inside track will build value into the process as those deep relationships are leveraged, and their market knowledge is used to your advantage.