Buying Aircraft

Differences between Buying New and Nearly New Aircraft

By May 29, 2018 July 4th, 2021 No Comments
jetstream law - A law firm handling domestic and international business jet transactions.
At this time, price is a significant factor when considering whether to buy new or nearly new aircraft.   When scanning the FOR SALE ads for nearly new aircraft, go ahead and imagine yourself walking down the aircraft steps after a quick flight and smooth landing.  In order to make that landing you must first consider the legal, financial and tax implications that differ between buying new versus nearly new.  Below are four key considerations to explore with a trusted legal advisor before entering into negotiations.

The Sales Price is Not Inclusive

With new aircraft, you know what is included with your sales price.  If the nearly new aircraft is foreign-registered or, registered in the United States but based and operated outside the country, you should expect to pay higher transaction costs.

Let the (Inspection) Records Show…

Nearly new (used) aircraft are sold “As-Is”.  Prior to closing on a nearly new aircraft a buyer must conduct a thorough inspection of the aircraft and review the aircraft records to identify all discrepancies and determine which discrepancies the seller will repair prior to closing.  Before you sign the offer and purchase agreement it is important to understand what discrepancies, if any, the seller will repair.

Where You Close and the Sales Tax You Owe

Aircraft manufacturers know where to close the sale to minimize sales tax for new aircraft.  The same rules do not always apply to pre-owned aircraft.  As the buyer, you need to determine and plan to address your sales tax exposure before you agree to a closing location in a purchase agreement.

Lien Into the Transaction

When searching for any liens against a nearly new airplane, look beyond an FAA and an International Registry search. For a domestic transaction, you should check for UCC and tax lien filings. If the aircraft is foreign registered or foreign-based, hire local legal counsel to advise you as to where to search for liens.

 

Michelle M. Wade is a Partner with the aviation law firm of Jetstream Aviation Law, P.A. and counsel clients on the acquisition, financing and operation of corporate jets operated under Part 91 and Part 135 of the US Federal Aviation Regulations. Jetstream Aviation Law can be found at www.JetstreamLaw.com. Michelle Wade (mwade@jetstreamlaw.com)

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