Airplane ownership

jason

jason

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Jason W (FlyNE)
Hey all,

I have a very general question. The daydreams are starting to become more frequent. It may be possible for me to own an airplane someday. This has got me to thinking...

I don't really believe in car payments because 1) I don't care what I drive as long as I arrive safely and 2) I have a hard time justifying loans on assets that depreciate as quickly as a car.

That said, I started wondering...

Q: Are small piston singles generally an appreciating or depreciating asset?

Example scenario: Let's say I were to go out and find a 1973 Cherokee 180 with decent time (~3000 hours TTAF - 100 SMOH), nice avionics (IFR certified with a Garmin 430 in the panel), and decent paint/interior (8 inside and out). All ADs are complied with. I buy this airplane for the listed Vref value.

Let's then say that I only fly this plane around 36 hours a year. I change the oil when I need to and have the annual completed like clockwork (fixing anything that turns up).

If inflation were to remain stagnant, and after 5 years I decided to sell the airplane, would my airplane be worth more or less than I paid for it?
 
For the first 5-10 years after manufacture, these sorts of planes are depreciating assets, usually losing 30-50% of their value. After that, they appreciate slowly but virtually forever. 1970's Grumman Tigers that sold for $30K new now sell for around $70K. In 1991, I paid $21K for a 1976 Cheetah that sold for about $25K, and (with some improvements, including paint, GPS, engine analyzer, and a lower time engine after overhaul) sold it for $48K in 2000. Thus, if you buy a 1973 Cherokee 180 for a good price and take good care of it, and keep it five years, you should get more than you paid for it less depreciation on the engine (about $8-10/hour flown) when you sell it.

Note that I said "a good price." Vref prices are basically retail asking prices, and most reflective of the total cost to purchase an airplane, including traveling to see them, performing pre-purchase inspections, getting title searches and damage/modification histories, etc. Few if any planes actually sell for their Vref values, which are truly useful only to set an insured value that guarantees replacement cost rather than market value.

In addition, if you fly your plane only 36 hours a year, you are likely to a) not stay proficient enough to fly it safely, and b) run into engine issues related to lack of use which may lower its value some.
 
When buying an airplane low time engines are not always the way to go. Look at how long ago the OH was done. My A&P told me he would rather I buy a plane that had a 1200 hr engine and was flown 100+ hrs a year over a 500 hr one that was OHed 15 years ago. Like Ron said, this will drop the price of the airplane because most likely it will need an OH.
Shop around and don't buy the first thing that comes along (Unless its an deal that you just can't pass up) I couldn't believe the amount of planes for sale at Oshkosh. With fuel prices pushing $5.00 a gal in some places, there will be some deals to be had. I see the single engine planes staying about the same or going up a little, but small twins will level off or go down in price. For example a 1966 Baron with low time engines, new leather interior, nice paint and good avionics sold for 90K here in MO. 2 years ago it would have sold for much more.
 
I bought a C-172 with over 1700 hours on the engine (1800 TBO). I elected to go ahead with the major and feel like I've got a hellava plane for the money that I've got invested. As it has turned out, I wouldn't have done it any other way. I suggest that you not just look at low time engines. You may find just what you are looking for. I'm sure others will have different experiences than I have had, but I really love what I have.

BTW, if 36 hours per year is all you plan on flying it, man keep renting. You will get an oil change at annual, but you won't even need it. I think you will be highly dissapointed by the costs of owning for that few hours. I'm not trying to bust your bubble, owning is expensive, and a great, great thing. You will really need to fly lots more to justify the costs.

Good luck and happy hunting.
 
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FlyNE said:
Let's then say that I only fly this plane around 36 hours a year. I change the oil when I need to and have the annual completed like clockwork (fixing anything that turns up).
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As the others said, 36 hours per year is bad for the airplane, not so good for your proficiency either.

Consider a partnership. You get the benefits of owning, but the fixed costs (insurance, annual, hangar, etc.) are spread out among the partners. I'm about to enter my third partnership -- they work well if you can find the right partners.
 
Thanks for your input everybody.

My Example Scenario was just that, an example. I was trying to figure out a way to illustrate the fact that the plane would essentially be the same when I went to sell it as it was the day that I bought it. If I were going to buy a plane I would absolutely plan on flying it more than 36 hours a year. That number was simply picked because it would keep the overall time roughly the same, while at the same time exercising the engine enough to prevent corrosion, etc. I don't consider the idea of me buying a plane only to fly it 36 hours a year any more realistic than the chances of inflation remaining stagnant for five years. :D

It just becomes easier to justify financing something like this if I know that the value of what I'm financing appreciates over time (like a house) as opposed to depreciating (like a car).

Great insight by all....keep it coming.
 
IME, as soon as you have enough money to buy the minimum airplane you will want, you will buy it.

And I prefer to just eliminate the engine. No worries about making it to TBO, I leave that up to the club with the towplane.
 
Leslie and I were bouncing around the idea of getting a used Skylane or something similar after Oshkosh this year. We'd be flying about 100-150 hours a year between the two of us. Unfortunately, the numbers on the face seem to say that it's still significantly cheaper to rent, since we don't have the capital available.
 
FlyNE said:
Thanks for your input everybody.

My Example Scenario was just that, an example. I was trying to figure out a way to illustrate the fact that the plane would essentially be the same when I went to sell it as it was the day that I bought it. If I were going to buy a plane I would absolutely plan on flying it more than 36 hours a year. That number was simply picked because it would keep the overall time roughly the same, while at the same time exercising the engine enough to prevent corrosion, etc. I don't consider the idea of me buying a plane only to fly it 36 hours a year any more realistic than the chances of inflation remaining stagnant for five years. :D

It just becomes easier to justify financing something like this if I know that the value of what I'm financing appreciates over time (like a house) as opposed to depreciating (like a car).

Great insight by all....keep it coming.
Click to expand...

The time thing can be fickle. If you bought a plane and flew it 100-200 hours a year as oposed to just the 36 in you scenario. I would expect to devaule the plane with the lesser amount of flight time/year from what you purchased it for. The reason is that because it has not flow it is more likely to need mechanical help from dry rot, corrosion, etc.
 
gprellwitz said:
Unfortunately, the numbers on the face seem to say that it's still significantly cheaper to rent, since we don't have the capital available.
Click to expand...

I love our club planes, two of them virtually new, with very good avionics and reasonable rates, so why do I want to own? If next weekend looks nice, and I want fly to the beach for the weekend, I can't. I can't the week after that. Or the week after that. I can't next month. Or the month after. If I want an airplane for a whole weekend, I'm looking at late October or early November earliest. Ugly. And the local FBO rentals? Nasty stuff.

I found a guy I will likely partner with, and we have similar desires in a plane, and similar timeframes, start serious looking about a year from now.

Present likely choice is M20J 201 with the avoinics we're accustomed to using. Possibly an M20F as well.
 
exactly why i bought my glider bill. Was only going to be able to fly on weekends, cant fly club ships on weekends for more than an hour if someone is waiting. Cant take club ships cross country. I dont like burning off a bunch of altitude on a good day so some other guy can fly. And now I can fly when i want and where i want. That makes it worth the purchase price.
 
purchased our first airplane a cherokee 180, for under 30K, thet is about the same as a FORD EXPLORER! We had a prop strike and ins bought us a new engine at 1800hrs (pro rated repair)

Sold that for about 10k moretan we paid, and bought a mooney, now a great avionic package, two new engines, (in five years) many speed mods, and we are running around in about a 75-80k airplane.. maybe, that is the hull value on our ins ploicy anyway.

the down side.... we spent more than the 40k or so we got back in appreceation, the upside? If I had to rent a mooney at 120$ hours or whatever, I would have had to come up with a butload more cash. and remember rent money is spent money. not to mention every job I had flying is through the contacts I have made in a single engine pistion.

So yes you can buy a plane, start small and reasonable, don't be afraid to go back to the 1960/70s if you have a good pre-purchase. a low time engine, (say with 600 hours) but rebuilt 15 years ago is run out no matter what the salesman tells you.

Also think about your flight time if you want your ins rating, and it takes say 30 hours of practice, that is 30 hours you are paying someone else for their airplane, vs. the 30hours you are paying yourself for your own airplane.
 
Dean said:
When buying an airplane low time engines are not always the way to go. Look at how long ago the OH was done. My A&P told me he would rather I buy a plane that had a 1200 hr engine and was flown 100+ hrs a year over a 500 hr one that was OHed 15 years ago. Like Ron said, this will drop the price of the airplane because most likely it will need an OH.
Shop around and don't buy the first thing that comes along (Unless its an deal that you just can't pass up) I couldn't believe the amount of planes for sale at Oshkosh. With fuel prices pushing $5.00 a gal in some places, there will be some deals to be had. I see the single engine planes staying about the same or going up a little, but small twins will level off or go down in price. For example a 1966 Baron with low time engines, new leather interior, nice paint and good avionics sold for 90K here in MO. 2 years ago it would have sold for much more.
Click to expand...

Very Strong Advice!!
 
If you want an airplane to appreciate in value, go crash it on the Greenland icecap and don't tell anyone where it is for 50 yrs...
 
Q: Are small piston singles generally an appreciating or depreciating asset?

Brand new ... depreciating

Good used (ie 7+ years old or older) ... appreciating.

I recently sold my 1/3 share in my PA28-180D. (1968 model) Had it 12 years, sold my 1/3 for just a hair over 2X what I paid for it. Good solid well cared for airplane, and the price was fair both times.

Your mileage may vary.

Brett
 
FlyNE said:
Thanks for your input everybody.

My Example Scenario was just that, an example. I was trying to figure out a way to illustrate the fact that the plane would essentially be the same when I went to sell it as it was the day that I bought it. If I were going to buy a plane I would absolutely plan on flying it more than 36 hours a year. That number was simply picked because it would keep the overall time roughly the same, while at the same time exercising the engine enough to prevent corrosion, etc. I don't consider the idea of me buying a plane only to fly it 36 hours a year any more realistic than the chances of inflation remaining stagnant for five years. :D

It just becomes easier to justify financing something like this if I know that the value of what I'm financing appreciates over time (like a house) as opposed to depreciating (like a car).

Great insight by all....keep it coming.
Click to expand...

The example you gave.... Under current economic conditions, the sample you gave would probably remain the same or increase slightly outside a small depreciation on the engine. This only holds true if you maintain the plane well and no major and/or recurring ADs crop up. Maintenance costs are not figured in, they are part of the costs of ownership. The key here is to have the reserve funding to take care of expensive issues when they arise. If suddenly your plane has an issue that denies it an annual, you suddenly have a LARGE drop in value and typically the cost to cover the repair is unrecoverable.
 
I wouldn't ever consider it likely that I would make money by owning an airplane. At $4-5/gallon for 100LL, the cost of operations alone will surely keep me from filling my swimming pool with gold coins.

I'm just wanting to know that at the end of paying off that loan, assuming that I've kept my end of the bargain, my money would be sitting in that hanger.
 
FlyNE said:
I'm just wanting to know that at the end of paying off that loan, assuming that I've kept my end of the bargain, my money would be sitting in that hanger.
Click to expand...
If you keep your plane the life of a normal aircraft bank loan (usually more like house length than car length), and take proper care of it, barring any bizarre events like GA being outlawed, the airplane will be worth more at that time than you paid for it originally.
 
You're certainly going to have an airplane that will sell for a higher dollar figure than the original selling price. Depending on the economy, it might even be worth as much as the selling price adjusted for time. It ain't (unless it's a collector's piece) going to be worth what you paid for it, plus the cost of the money you borrowed, adjusted for time. And it probably won't have "gained" any real value.

So don't go thinking of an airplane as a growth investment. That said, it will not depreciate the way a car or a boat will, so you won't lose AS MUCH money, and you will enjoy a high fun/cost ratio.
 
I have purchased two airplanes within the past 36 months. I used a small town locally owned bank for both the purchases. The VP of the bank was more than happy to do an aircraft loan He said that airplanes are as good of investment as some homes. If you take care of them or do some remodeling, they never lose their value.
The first plane I bought was a 1974 150L, I kept it for about 14 months flew it over 125 hrs and sold it for $4K more than I paid for it. I now have a 172E and have been offered $7K more than I paid for it, and I have only had it for 6 months. The only problem with selling it is I couldn't replace it for what I bought it for.
If you shop around or in my case take advantage of someones miss fortune, you can make money or stay even.
The 172 I picked up from an A&P who had rebuilt the engine and the owner couldn't pay the bill. The owner signed it over to the A&P and I bought it for what was owed against it. :yes:
 
FlyNE said:
I wouldn't ever consider it likely that I would make money by owning an airplane. At $4-5/gallon for 100LL, the cost of operations alone will surely keep me from filling my swimming pool with gold coins.

I'm just wanting to know that at the end of paying off that loan, assuming that I've kept my end of the bargain, my money would be sitting in that hanger.
Click to expand...

If you are talking just the principle you borrowed, then the odds are you will be ahead. Given current economic conditions, you may even come out ahead of inflation, and if you borrowed short term at a good rate and then kept it 3 times longer than the loan, you may even come out ahead of the interest. Unless you come accross extrodinary circumstance, you will never come out ahead of maint, mods, repairs, fixed costs.... It's not a house.
 
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