Aircraft financing

brien23

brien23

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Brien
Home loans are starting to go south can't find any information on piston aircraft loans suspect if it comes to food, house or the aircraft loan food and house comes first. Question is sell now for whatever you can get or hold on and hope the value does not go below what you owe. It's not just the loan you still have to annual it, insurance, hangar or ramp cost. Just when I thought Twin Price were starting to comeback now this will set them back again if they ever rebound. Things will get better it's how long are you able to afford the aircraft.
 
I would agree. I probably would not ever finance an airplane, unless it was a business tool.
 
Were you planning on selling now anyway? Otherwise who cares about the value at this point. Keep flying. Are you in a position to where work might become sketchy or already is? In that case time to come to grips and sell off. Otherwise keep flying and don't pay attention to value.
 
Some of us just aren’t that well off I guess. I have a plane loan and it works out fine. It’s a car payment with better terms. What I see people spend on cars and then finance them for 6-7 years is incredible to me. A plane has better residue value and I was able to buy a better equipped safer plane. To each their own. FYI - I found Bantera to be absolutely excellent to work with.


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I don’t finance my cars either... but that’s just personal preference.
 
Contrary to what OP stated, people are lining up to refinance. A friend of mine is a mortgage banker and now working 12 - 14hr days just to catch up, and interest rates are not even that much down ... yet
 
I'm trying to refinance my house. My wife is against financing airplanes but has no issue with doing the same for a beach house. So... something I'll use every weekend vs something we'll use on the weekends in the summer inbetween sports and stuff is somehow better because it's a house? To each their own. I'll be buying a 60s 182 or, hopefully, 205 instead of a restart 182 w/ gee whizz avionics as a result and then eventually paying the same to get the avionics similar...
 
Snowmass said:
To borrow money to buy an expensive, money eating toy like an airplane is beyond my comprehension. But, I am very non-conformist about most things.
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Since probably 95% of potential weekend flyers couldn't pay cash for a plane, it shouldn't be beyond your comprehension. (Yeah, I paid cash for mine, but the next one, not likely.)
 
I financed my plane. I wouldn't have had one otherwise for two decades. In fact, I wish I'd done it earlier. I got a ten year AOPA loan (getting the loan was easy, MBNA/Nations Bank/BofA' servicing was a mess). I paid it off early.

To get back to the original premise, the question is how desperate you are. Why would you want to sell? Are you not flying again for what reason? Generally, I suspect that while refinancing might be attractive, this is a lousy time to sell just on the fact that values are depressed because people aren't shopping.
 
brien23 said:
Home loans are starting to go south can't find any information on piston aircraft loans suspect if it comes to food, house or the aircraft loan food and house comes first. Question is sell now for whatever you can get or hold on and hope the value does not go below what you owe. It's not just the loan you still have to annual it, insurance, hangar or ramp cost. Just when I thought Twin Price were starting to comeback now this will set them back again if they ever rebound. Things will get better it's how long are you able to afford the aircraft.
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Just to be clear, are you asking when to sell your plane?

If that is the question, I feel now is the decision time. If you want to sell in the next year, I would suggest that you put it on the market as soon as the isolation lifts. The next year is going to be rather unpredictable, because we don't have data about how a modern economy will react to this level of stoppage. Its similar to restarting a facility after a maintenance shutdown, you cannot predict the output until it has run for a week, just on a massive scale. In addition, many individuals have lost their jobs, or are still wondering if they are going to keep their jobs. Anyone who has a grandparent or parent who lived through the great depression can tell you that this will have a psychological impact on spending, that will take at least a year to shake, but it won't necessarily hurt every seller. For example, expensive planes may be shelved for lower cost to own planes, a buyer with a $50K down payment on an A36, may instead look to pay cash for a twin if they only need 4 seats but want the higher useful load, because the monthly payment will buy a lot of gas and MX.
 
Tommar98 said:
Some of us just aren’t that well off I guess. I have a plane loan and it works out fine. It’s a car payment with better terms. What I see people spend on cars and then finance them for 6-7 years is incredible to me. A plane has better residue value and I was able to buy a better equipped safer plane. To each their own. FYI - I found Bantera to be absolutely excellent to work with.


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You must be really rich because not only can you afford the plane you can afford to pay at least 20% of the purchase price for interest.
 
I made paying cash part of my “mission”, but....it’s an amazing privilege, and you only live once - I borrow for things sometimes, but am always aware the borrower is a slave to the lender.

Mine was cheap...cheaper than my old work truck...so that helps...
 
brien23 said:
Home loans are starting to go south can't find any information on piston aircraft loans suspect if it comes to food, house or the aircraft loan food and house comes first. Question is sell now for whatever you can get or hold on and hope the value does not go below what you owe. It's not just the loan you still have to annual it, insurance, hangar or ramp cost. Just when I thought Twin Price were starting to comeback now this will set them back again if they ever rebound. Things will get better it's how long are you able to afford the aircraft.
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I financed my first plane. Had enough cash to purchase outright, but kept it on the side for a year or so until all the sqawks were ironed out, then paid it off.

A 3% interest rate was rather low at the time. I do fly for fun, but the main purpose was for travel, not being reliant on airlines, plus grocery runs etc.
 
You got 3% on a plane?!

I financed my first two planes, paid cash for the most recent one. I'll never finance a plane again - so much less stress without debt. But then again, I'm much more conservative in my ripe old late-30s age than I was in my 20s.

I keep waiting for the airplanes and housing markets to fall apart. I assume that is coming. I don't see how we avoid it, unless the world economy just snaps back tomorrow like nothing ever happened, which it won't. When that time comes, I am keeping my eye out for a turbo legacy 206 of any year or configuration... anyone? Anyone?? @wheaties you can buy my 205 when I find it!
 
MarkH said:
Just to be clear, are you asking when to sell your plane?
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He's not asking anything really - this is just his next regularly scheduled, pot-stirring, glass half empty thread. He's quite good at it and usually gets a spirited debate going :popcorn:
 
dans2992 said:
I don’t finance my cars either... but that’s just personal preference.
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I always finance them as this is a tool to get a better deal. This helps me get a better price on the car as the "think" they are going to make money on the financing. When I get the loan book, I call, get the payoff amount, write the check and done - BOOM!

Actually had the finance manager at the dealership call me and cuss me out because of this... guess he wasn't going to get his commission.

That said, I agree with paying cash for a toy philosophy.
 
That’s a good strategy! Assuming your dealer will give you a better deal.

Get them to bake their profit into a high interest rate!! Ha.
 
AA5Bman said:
You got 3% on a plane?!

I keep waiting for the airplanes and housing markets to fall apart. I assume that is coming. I don't see how we avoid it, unless the world economy just snaps back tomorrow like nothing ever happened, which it won't. When that time comes, I am keeping my eye out for a turbo legacy 206 of any year or configuration... anyone? Anyone?? @wheaties you can buy my 205 when I find it!
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Here is how collapsing prices are avoided - the federal reserve nationalizes the bond market and, in addition to other measures, expands "it's" balance sheet by trillions of dollars. Not a typo. And not hypothetical since it was done last week.

If you're wondering, "it's" is in quotations because it's really your money. Or your children's. Taken from your future earnings.
 
BPM said:
Here is how collapsing prices are avoided - the federal reserve nationalizes the bond market and, in addition to other measures, expands "it's" balance sheet by trillions of dollars. Not a typo. And not hypothetical since it was done last week.

If you're wondering, "it's" is in quotations because it's really your money. Or your children's. Taken from your future earnings.
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Not breaking any new ground here ...but one way or another this will end badly - you just can’t print your way out of a crisis like that. Money is just a representation of actual material wealth and unless there is new wealth backing all that new money , it is just worthless paper. The only question is who is going to get stuck with that worthless paper once it becomes worthless.
 
I pulled money out of my 401(k) to finance my portion of a business that owns an airplane.

The funny thing is I pay back into my 401(k) better than it has been earning so far this year.

I never thought I would make money by borrowing money but it appears so.


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k9medic said:
I pulled money out of my 401(k) to finance my portion of a business that owns an airplane.

The funny thing is I pay back into my 401(k) better than it has been earning so far this year.

I never thought I would make money by borrowing money but it appears so.


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Just like a bank, wait until your kids think you're an ATM. :)
 
AA5Bman said:
You got 3% on a plane?!

I am keeping my eye out for a turbo legacy 206 of any year or configuration... anyone? Anyone?? @wheaties you can buy my 205 when I find it!
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Good luck and I'll take your bird off your hands! Careful with the T 206s, cooling can be problematic. If you thought conti cylinder don't make TBO on an NA, wait till you turbo them.
 
BPM said:
Here is how collapsing prices are avoided - the federal reserve nationalizes the bond market and, in addition to other measures, expands "it's" balance sheet by trillions of dollars. Not a typo. And not hypothetical since it was done last week.

If you're wondering, "it's" is in quotations because it's really your money. Or your children's. Taken from your future earnings.
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We continue the quiet shuffle into USSA (United Socialist States of America).

The Fed will just continue printing by fiat. The Treasury will just continue borrowing. Locally, tax on real estate, aircraft, etc. will be increasing substantially in the next few years to cover for revenue losses in income tax and sales tax. 1920s Weimar Republic Policy, meet 2020s American Policy. :eek:

There is a case to be made for buying older frames to avoid some of the ongoing property tax...or buying a new frame and taking its full depreciation the first year.
 
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Warmi said:
Not breaking any new ground here ...but one way or another this will end badly - you just can’t print your way out of a crisis like that. Money is just a representation of actual material wealth and unless there is new wealth backing all that new money , it is just worthless paper. The only question is who is going to get stuck with that worthless paper once it becomes worthless.
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Exactly!!!
 
Ventucky Red said:
I
Actually had the finance manager at the dealership call me and cuss me out because of this... guess he wasn't going to get his commission.
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I was working with the sales/finance guys when I bought my truck. I would have paid cash but they were willing to give me an incentive to finance it (and make at least four payments). I said that the interest involved wouldn't make that advantageous to me (it would have been about a break even). Then the finance guy told me I could just make a large down payment. So, I made a down payment (way over half the price of the vehicle). He's happy, I get a few hundred in additional rebate and probably jacks up my credit score some in the long run (not that it needs it). It's the only debt I have right now.
 
I usually don't finance toys but with airplanes you'd figure probably spending anywhere from $200-$1000 + a month if renting one regularly from a club to enjoy the hobby. When you factor in financing one under $100K for example, fuel, ins, hanger, mx against what you'd get when/if it comes time to sell it, it may "save" you money long term?
 
Financing a plane for me personally comes down to opportunity cost. I could have waited to pay cash for the plane or I could finance the plane and pay cash for something else. For instance, I put a down payment on a rental home that gives me enough cash flow to cover the monthly cost of financing the plane. For zero dollars monthly cash flow, I now have two assets between the house and plane. Now I can save enough for another rental home down payment and use the cash flow to pay off the higher interest rate loan early. AND I get to fly while doing it. The alternative was to either buy the rental home and wait until the cash flow built up enough over time to buy a plane with cash (but then why wouldn't I buy the rental home with cash...) which would have taken years and I wouldn't have the experiences I have now.

Liabilities are not bad if you don't over-leverage and you plan accordingly. A plane is an asset more similar to a house than a car (a car is not an asset unless it will appreciate like an old high-value collector item).

For the OP:
Value and equity are only ideas or estimates until you actually agree to a selling price. If you don't intend to sell for a while, then those concepts don't matter at all (similar to right now if you don't plan on retiring and drawing from your stock investments, you shouldn't care that stocks have crashed--they'll go back up again before you care). If you DO think you would be selling soon and don't anticipate the market improving between now and when you were going to sell, that's the only situation where you should sell earlier than you planned to avoid a loss. As long as your job is secure and you can afford the payments going forward, the value of the plane is what YOU think it is until you sell it (then the value is what THEY think it is).
 
GrummanBear said:
I made paying cash part of my “mission”, but....it’s an amazing privilege, and you only live once - I borrow for things sometimes, but am always aware the borrower is a slave to the lender.

Mine was cheap...cheaper than my old work truck...so that helps...
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What is that a Grumman AA1A? I'm looking at Travelers and Tigers for my first plane or a Mooney M20 or Cessna 182 lol. I have a thread going if you want to vote.
 
flyingron said:
I was working with the sales/finance guys when I bought my truck. I would have paid cash but they were willing to give me an incentive to finance it (and make at least four payments). I said that the interest involved wouldn't make that advantageous to me (it would have been about a break even). Then the finance guy told me I could just make a large down payment. So, I made a down payment (way over half the price of the vehicle). He's happy, I get a few hundred in additional rebate and probably jacks up my credit score some in the long run (not that it needs it). It's the only debt I have right now.
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I worked at a car dealership...new cars...sometimes the only way we can get you like $1000 off of say Toyota money is if you do setup the financing. We'd tell ppl to set it up and the next week just call in and pay it off. Then you get to take advantage of the financing terms we couldn't offer if the person just wanted to pay cash right away.
 
Those of us that buy airplanes as toys vs. a business tool realize that we aren’t buying them as financial investments (mostly). If financing my airplane for $500 per month allows me to own it now and have the cash left over to maintain and buy gas for it, then so what? I realize some people value every dollar they earn, and that’s great. Some of us value time spent doing what we want while we are healthy enough to do it. I’m going to pay a bunch of interest on the loan of my airplane...but while I’m doing that I’ll be flying around in my plane.

I’m not going to be on my death bed wishing I had paid less interest on my Arrow...
 
Jmcmanna said:
I’m not going to be on my death bed wishing I had paid less interest on my Arrow...
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No, but you might be lying there wishing you had saved enough money for better medical care or a nicer nursing home or to care for your spouse.
 
Ben Anderson said:
I worked at a car dealership...new cars...sometimes the only way we can get you like $1000 off of say Toyota money is if you do setup the financing. We'd tell ppl to set it up and the next week just call in and pay it off. Then you get to take advantage of the financing terms we couldn't offer if the person just wanted to pay cash right away.
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I watched a YouTube vid made by a new car salesman explaining how most of the money is made at the financing desk. My parents were always cash buyers and always made it big deal out if it and still have an expectation to “get a good deal when paying with cash”. I don’t disagree with them, I still try to pay cash for anything (cars, planes, etc) but seems like today’s car dealer purchase requires some strategy. I do not buy new and tend to buy from private parties so there are significant savings right there.
 
Half Fast said:
No, but you might be lying there wishing you had saved enough money for better medical care or a nicer nursing home or to care for your spouse.
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Maybe, but then I’d be in a slightly nicer nursing home wishing that I had owned that Arrow I was looking at 50 years earlier...
 
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