Plane financing

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mtuomi

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Hi y'all...

This is something that will be doable about 6-8 months from now, but interesting anyway.
I'm in the position, where I can afford a plane. Only a cheap one at this point, C172 or similar.
Does anyone have recent examples of plane financing? Our credit score is 800+, so we should be fine with that.
What is the market like, for someone looking to finance 20ish k, with 50% down. And do they really care about the age of the plane for that?

Interesting stuff...
 
I was in the same boat this summer. I was looking to spend between $50-60K on my starter plane. I started researching finance options and went through AOPA who put me in touch with a finance company. What I found was the terms got less attractive the less money you planned to spend.

If I remember right the terms I received were 10-15 years, with 20% down at 6.5%. There was also a $700 closing/paperwork fee associated with originating the loan. They also required the usual loan paperwork and then some... I think most of it involved details about the plane, probably to get some type of Vref on it. I have a low Debt to Income ratio and 800+ credit scores so I'm assuming these terms are either normal or because the loan amount was going to be sub $50K.

I ended up partnering on a plane with a friend of mine and used cash for that as well as the upgrades we've done to it the last few months. Maybe in the future we'll sell the plane and use the 80K as a down payment to a fancier plane and make the financing worth it.
 
You say you can afford a plane yet ask about financing. If you are financing you can't afford a plane but rather can afford payments. Big philosophical difference.
*EDIT* Sam beat me to it.
 
The smaller the loan the harder to get a good rate,some companies won't consider anything under 25 K. The year of the plane is also important. The older the plane the harder to find a lender.
 
With that credit score go with lightstream loans. They have one for airplanes. Zero down, about 4% interest, no security, they just transfer it to your bank account and you can write a check for your bird
 
I sure hate being the killjoy party pooper here but..... Unless you have a business justification, do you REALLY want to finance something like an airplane?

It just doesn't make sense to me when someone finances a toy like this. I've seen so many people over the years go in debt for boats, motorcycles and other unnecessary items. A person has to have somewhere to live and transportation. Financing lifes big ticket necessities makes sense if done with a practical approach, and making the loan term as short as possible.

For someone who can truly justify an airplane for a business situation, that also makes sense. Financing one as a toy just doesn't seem smart. If you will set money aside until you can afford to pay cash, you will be SO much better off.

Again, sorry to be the naysaying party pooper, but I learned a long time ago that I am SO much better off staying away from the bank except for dealing with checking and savings accounts. The sooner in life that you are out of debt, the better off you will be.

Please don't anyone take offense or feel that I'm passing judgment. I'm just trying to point out the advantages of being debt free.
 
Sam D said:
Why finance if you're able to buy it outright?
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Extra liquid assets sometimes come in handy, so borrowing somebody else's money instead of using your own may make tactical sense on occasion. Such as a case where some of my cash is about to be used in a high-return, high-risk endeavor, but I'd also like an expensive toy.
 
Who had post #3 as the over/under on turning a financing question into holier than thou lesson from those that don't believe in financing.

Here is the real question why would I use 20k of my money when I make way more than the going rate for interest? I can borrow funds at 4% or less for a plane that makes me money?

Just answer the guys question. If anyone wants a personal finance lesson I'm sure they shouldn't ask guys that fly. F'n guy has an 800+ score and is talking about a $20k plane, I've lost that at Vegas. How much could he hurt himself by financing that? That guy is probably the MOST responsible person on the board.

Some of the non-aviation advice here is tiresome. Everytime I see it it irks me. Has to have the same effect for some of you too.
 
tlrussell said:
Who had post #3 as the over/under on turning a financing question into holier than thou lesson from those that don't believe in financing.

Here is the real question why would I use 20k of my money when I make way more than the going rate for interest? I can borrow funds at 4% or less for a plane that makes me money?

Just answer the guys question. If anyone wants a personal finance lesson I'm sure they shouldn't ask guys that fly. F'n guy has an 800+ score and is talking about a $20k plane, I've lost that at Vegas. How much could he hurt himself by financing that? That guy is probably the MOST responsible person on the board.

Some of the non-aviation advice here is tiresome. Everytime I see it it irks me. Has to have the same effect for some of you too.
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I had 4. I am right with you. It seems to be getting harder and harder to just get a question answered. I don't post questions on here anymore.
 
MBDiagMan said:
I sure hate being the killjoy party pooper here but..... Unless you have a business justification, do you REALLY want to finance something like an airplane?

It just doesn't make sense to me when someone finances a toy like this. I've seen so many people over the years go in debt for boats, motorcycles and other unnecessary items. A person has to have somewhere to live and transportation. Financing lifes big ticket necessities makes sense if done with a practical approach, and making the loan term as short as possible.

For someone who can truly justify an airplane for a business situation, that also makes sense. Financing one as a toy just doesn't seem smart. If you will set money aside until you can afford to pay cash, you will be SO much better off.

Again, sorry to be the naysaying party pooper, but I learned a long time ago that I am SO much better off staying away from the bank except for dealing with checking and savings accounts. The sooner in life that you are out of debt, the better off you will be.

Please don't anyone take offense or feel that I'm passing judgment. I'm just trying to point out the advantages of being debt free.
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The OP didn't get an 800+ score by NOT borrowing, and then repaying on schedule.
 
Some folks don't keep their assets in the form of cash stuffed under their mattresses. Honestly, it's not anyone's damn business why the OP is intending to borrow unless they plan on underwriting the loan. One option to the OP may also be seller financing. Some may be willing to do it, particularly if they're not upgrading to something else.

For disclosure--I did pay cash for my bird.
 
Find a loaded aunt, uncle, parent, or friend and borrow it from them.

Saves a ton and it can be done right where everyone is protected.

A lot of loaded people would jump for joy to make 6.5% guaranteed on their money.
 
MBDiagMan said:
I sure hate being the killjoy party pooper here but..... Unless you have a business justification, do you REALLY want to finance something like an airplane?

It just doesn't make sense to me when someone finances a toy like this. I've seen so many people over the years go in debt for boats, motorcycles and other unnecessary items. A person has to have somewhere to live and transportation. Financing lifes big ticket necessities makes sense if done with a practical approach, and making the loan term as short as possible.

For someone who can truly justify an airplane for a business situation, that also makes sense. Financing one as a toy just doesn't seem smart. If you will set money aside until you can afford to pay cash, you will be SO much better off.

Again, sorry to be the naysaying party pooper, but I learned a long time ago that I am SO much better off staying away from the bank except for dealing with checking and savings accounts. The sooner in life that you are out of debt, the better off you will be.

Please don't anyone take offense or feel that I'm passing judgment. I'm just trying to point out the advantages of being debt free.
Click to expand...


Before getting all up in other peoples business, would you say the same thing about someone wanting to borrow $20k for a pickup truck? How about a $60k BMW. I sure wouldn't. Right now I'm looking at doing the exact same thing as the OP. I technically could pay for the plane up front, but it would mean spending all of my savings, and having nothing in reserve for those surprises. My truck is paid off, my boat is paid off, my motorcycle is paid off. I have a $150 car payment on my daily driver and the rent on my house. I can easily afford a payment on a plane. Just because it's not a primary mode of transport doesn't make it any different. My primary modes of transport are paid for, why not make payments on a plane instead of a car? It's just money.

When I bought my truck I had to put it under my mothers name because I was young and had no credit. Paid it off and got nothing out of it credit wise. When I bought my motorcycle I had a 783 credit score but no history, so they still required a cosigner. Yep, I financed a "toy", and a pretty expensive one at that. Paid that off in 1/3 of the term and suddenly they were falling all over me to get another loan. I had the cash to buy my car, but I'd rather have that cash in my account for when that awesome deal on a new piece of shop equipment falls in my lap and I need $5k TODAY. Now I have the credit to buy pretty much whatever I want, and I did it by financing a "toy".

Borrowing money you cant afford to pay back is stupid. Borrowing money that's easy to pay back gives you options. It helps your credit, it allows you to keep your own cash reserves, and if you're not paying ridiculous interest rates and you can make the payment every month there's no reason not to. I try to borrow against money I already have. If push came to shove I could pay my car loan off tomorrow, but in the long run I get more out of making double payments every month on a super low interest loan.
 
Lots of people are high and mighty about how great their investments are and how smart they are with finance. Right up to the point that they aren't.

A disposable toy should be bought with free cash. And that's what a plane is, since on any day it can require a repair costing more than it's worth.

I have no problem with debt, we have lots of it. Debt to buy land, a tractor, or an 18 wheeler, absolutely. Debt to buy a motorcycle or airplane or snowmobile? You've got to be off your rocker.
 
I actually had no problem with the aircraft loan (I paid it off about seven years in because the idiots at MBNA managed to finally not only **** me off with their inane customer service but they also manage to **** off reps of both my mechanic and the insurance company after I had a claim). At the time I had a loan on the plane (and my house) but I didn't have credit card debt and I was driving 12 year old paid off cars.

You can't make a real claim as to what does or does not make sense to finance unless you look at the overall financial picture.

In May of this year I finally sold my old house of 23 years. That wiped out the last debt I had. Three other houses, four cars, a boat, and an airplane are all mine free and clear.

As Scotty Crossfield would say, his Cessna wasn't as fancy as the planes he flew all through his career but "IT IS MINE AND IT'S PAID FOR."
 
Try your local credit union. Mine gave me good terms when I bought out my partner. Something down, something every month for 5 years, just like a car payment but without the low, low rates.

I didn't t have a car payment from 2003 until a deer ran into my wife's car in 2011, and the insurance check paid half of the replacement cost with negligible 3- year payments.
 
No matter what, you're financing everything even if you use so-called cash. American cash is ON CREDIT. The cash cost to you is the opportunity loss. Just take whatever is the lowest loss based on your situation and your plan. Life is short. Plan for tomorrow, but you gotta eat (and recreate) today.
 
I've paid cash for all my toys, and modes of transport. I'm paying a mortgage on my house, but it's nearly paid off, and the interest deduction isn't what it used to be.
I'm thinking of doing a re-fi, and take cash out to buy another airplane. Airplane will be paid for, and I'll be able to take the deduction of interest for another 15 years.
But that's the only way I would consider financing an airplane, or other toys.
 
Jaybird180 said:
... Life is short. Plan for tomorrow, but you gotta eat (and recreate) today.
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ding ding ding...I hate debt as much as the next guy. I am fortunate enough to have been able to pay cash for my plane (partnership), but thats not the only move for everyone. Debt sucks, but if you have sufficient cash flow and savings to cover issues, I see nothing wrong with financing a plane as long as you aren't stretched. As we all know, the cost of the plane is minuscule to the operating costs and upkeep...If I had $50K in my fun reserves and wanted a plane, I would not hesitate to make a hefty down payment and finance the rest leaving cash in savings to cover issues and flying expenses. As long as someone doesn't burden the system with bankruptcy, I couldn't care less how they fund their recreation!
 
By the way, this guy has great credit, so he knows how to play the credit game...not everyone will crash and burn if they buy something on credit...
 
It seems like there are three things people will always give you unsolicited advice on, how to grill your own steaks, how to raise your kids, and how to spend your money......

I just went through this about two months ago. I ended up going with Wells Fargo and it was relatively painless. Now, I'll say the interest rate is not real great, but then again, my plan is to pay it off in the next year or so, so I was more interested in getting the deal closed. WF basically loaned 90% of the wholesale value as calculated by aircraft blue book. WF was also very light on the required documents, basically just pulled credit and a one page sheet on the airplane.
 
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StinkBug said:
Before getting all up in other peoples business, would you say the same thing about someone wanting to borrow $20k for a pickup truck? How about a $60k BMW. I sure wouldn't. Right now I'm looking at doing the exact same thing as the OP. I technically could pay for the plane up front, but it would mean spending all of my savings, and having nothing in reserve for those surprises. My truck is paid off, my boat is paid off, my motorcycle is paid off. I have a $150 car payment on my daily driver and the rent on my house. I can easily afford a payment on a plane. Just because it's not a primary mode of transport doesn't make it any different. My primary modes of transport are paid for, why not make payments on a plane instead of a car? It's just money.

When I bought my truck I had to put it under my mothers name because I was young and had no credit. Paid it off and got nothing out of it credit wise. When I bought my motorcycle I had a 783 credit score but no history, so they still required a cosigner. Yep, I financed a "toy", and a pretty expensive one at that. Paid that off in 1/3 of the term and suddenly they were falling all over me to get another loan. I had the cash to buy my car, but I'd rather have that cash in my account for when that awesome deal on a new piece of shop equipment falls in my lap and I need $5k TODAY. Now I have the credit to buy pretty much whatever I want, and I did it by financing a "toy".

Borrowing money you cant afford to pay back is stupid. Borrowing money that's easy to pay back gives you options. It helps your credit, it allows you to keep your own cash reserves, and if you're not paying ridiculous interest rates and you can make the payment every month there's no reason not to. I try to borrow against money I already have. If push came to shove I could pay my car loan off tomorrow, but in the long run I get more out of making double payments every month on a super low interest loan.
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Actually, I would indeed say the same thing about borrowing for a pickup, a BMW or an old beat up Ford for that matter. Getting to a point in life as soon as possible where you no longer need to borrow money is a good thing IMHO.

Before riding my butt on this subject, you might want to read ALL of my post including the part where I said I wasn't passing judgment.
 
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N2124v said:
It seems like there are three things people will always give you unsolicited advice on, how to grill your own steaks, how to raise your kids, and how to spend your money......
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And especially beware of those on "Mount stupid" :)

Mount-Stupid.gif
 
I think that I have accidentally stumbled upon a subject akin to religion or politics.

I have no idea, and have never so much as googled about how much American personal property is not owned by the owner, but rather is collateral, but I expect that the percentage is much higher than it should be.

I know a few people who have quite a number of toys and really nice houses, but at the same time don't have two nickels that they could rub together and call their own. My personal preference is to carry a positive net worth and to owe no man.

I will simply say that it is everyone's right to deal with their own personal finances the way they see fit. By the same token, I would expect that everyone would be good with my own philosophy of remaining debt free.

To the OP, I wish you all the best with your knew to you aircraft. Enjoy it. I apologize if my comments brought any ill will to your thread. I meant no harm.
 
mtuomi said:
Does anyone have recent examples of plane financing? Our credit score is 800+, so we should be fine with that.
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Not real recent, but I helped finance my Cirrus with a home equity loan.

Do you have home equity?

Needless to say, only to be considered if the ability to repay is unquestioned.

BTW, some may not want to sell securities to buy toys due to tax implications on capital gains.
 
It is none of my business if someone wants to finance all or part of their plane. Since he asked about financing I would recommend a home line of credit is possible. I have a few paid off houses and have a line a credit sitting around on all of them in case a deal comes up on another house I can pay cash with the lines of credit and close a deal fast. The paper work was minimal on the loans.
 
MBDiagMan said:
I think that I have accidentally stumbled upon a subject akin to religion or politics.

I have no idea, and have never so much as googled about how much American personal property is not owned by the owner, but rather is collateral, but I expect that the percentage is much higher than it should be.

I know a few people who have quite a number of toys and really nice houses, but at the same time don't have two nickels that they could rub together and call their own. My personal preference is to carry a positive net worth and to owe no man.

I will simply say that it is everyone's right to deal with their own personal finances the way they see fit. By the same token, I would expect that everyone would be good with my own philosophy of remaining debt free.

To the OP, I wish you all the best with your knew to you aircraft. Enjoy it. I apologize if my comments brought any ill will to your thread. I meant no harm.
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I would NOT be one of those people. Being debt free is an old wives tale.

There is 10%-14% real inflation right now. Literally a stupid tax.

So I can spend lent money at 4% or less or cash. I choose to invest every single fake dollar I have into my business and investments that return something other than some ridiculously low return.

Best case is I earn some money and make myself less desirable to any civil or criminal action against me or my estate. I literally own nothing in my name and nothing that doesn't have a loan of some sort against it. All assets st in a Corp of which I'm an employee. That corp is in an LLC controlled by a blind trust. Secret service couldn't find my stuff.

I used my corp to loan me the money for my plane. Use it for business, pleasure and Angel Flights. I pay myself 12% interest and with no lien, no insurance. That is a free annual every year.

Worst case and the SHTF I'll walk into the bank and payoff my fixed cost debt. I wonder if they will have change for my $5,000,000.00 bill. I bet even money that Obama's face will be on it.

If interest rates go up that is sweet I'll liquidate my assets as needed to buy other assets that others are defaulting on because of bad financing. 25 years from now after I have depreciated them I'll sell them and start all over.

It sounds sexy to be debt free and I know that most kool-aid drinkers won't even consider another way, good luck.

Leverage is your friend if you embrace it and you have access to cheap capital.
 
MBDiagMan said:
The best credit score is not having or needing a credit score.
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Not needing is one thing. Not having sucks when you wanna buy a house, or someone totals your car and doesn't have insurance, or any number of things happen requiring you to come up with a lot of money in a hurry. You wanna live completely debt free, that's great. It never hurts to be ABLE to borrow at the drop of a hat though.
 
JHW said:
I have no problem with debt, we have lots of it. Debt to buy land, a tractor, or an 18 wheeler, absolutely. Debt to buy a motorcycle or airplane or snowmobile? You've got to be off your rocker.
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If you have the money, what difference does it make? Yeah, this country is full of idiots living in half million dollar houses and driving luxury cars that they cant afford. That's dumb. But if you can easily afford a $2-400/month car payment, but already have a car that is paid off, why is it any different to spend that same money on a payment for something else of value?

Here's another question. Most people seem to think it's totally acceptable to get a loan on a $40k car and make payments for 5 years. At the end of that 5 years you're lucky if that car is worth $20k. Substitute car for old airplane and at the end of 5 years the plane is likely still worth $40k, and definitely a lot more than $20k. Tell me how that's more crazy or stupid than financing the car?
 
Sam D said:
Why finance if you're able to buy it outright?
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Depends no what the difference in terms is. If your capital is more productive than the cost of the loan, one is best off using borrowed capital.
 
StinkBug said:
Substitute car for old airplane and at the end of 5 years the plane is likely still worth $40k, and definitely a lot more than $20k. Tell me how that's more crazy or stupid than financing the car?
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hardly. many people here are flying planes worth a third of what they paid for them a few years ago
 
StinkBug said:
If you have the money, what difference does it make? Yeah, this country is full of idiots living in half million dollar houses and driving luxury cars that they cant afford. That's dumb. But if you can easily afford a $2-400/month car payment, but already have a car that is paid off, why is it any different to spend that same money on a payment for something else of value?

Here's another question. Most people seem to think it's totally acceptable to get a loan on a $40k car and make payments for 5 years. At the end of that 5 years you're lucky if that car is worth $20k. Substitute car for old airplane and at the end of 5 years the plane is likely still worth $40k, and definitely a lot more than $20k. Tell me how that's more crazy or stupid than financing the car?
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It all depends on the value the plane provides. As long as people don't think of it as a fiduciary investment. You are investing in pleasure, you are investing in piece of mind, you are investing in mission capability, you are investing in your time and your life. The one thing you are NOT investing in is a machine. The airplane itself is a liability. Keep your priorities straight and aviation is easier to take.
 
Aircraft ownership is a long term gamble with regards to capital cost, and every year you have to reante your hand in the pot. Just like at the Blackjack table, the house wins the majority of the hands, but occasionally an individual player can have a lucky streak and walk away ahead if they help themselves a bit by gambling smart and with discipline with their bit of luck. If you play smart, you can play a long time on not a whole lot of money.
 
JHW said:
hardly. many people here are flying planes worth a third of what they paid for them a few years ago
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Yep, those are the people who would benefit the most from a panel upgrade and just fly it as much as you can as long as you can.

It would be interesting to see a plane trade website handling short, long, and permanent trades.
 
JHW said:
hardly. many people here are flying planes worth a third of what they paid for them a few years ago
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Good point.

Financing depreciating assets is a costly losing game imo. Coarse, some planes have gone up, like the 1976 C-206 turbo Stationair we bought new for $60K in 1976. Planes are a crap shoot. Planes and cars I should say. For example if I had been forced to borrow the $3000.00 to buy our 1971 Mopar back in 1992 when I bought it, and I serviced the note, it has turned out to be one of the best investments I've ever made. :)

Leverage is good for real estate, or a business, or something that is supposed to appreciate or grow. Borrowing for the "I wants" is usually bad joojoo. If you can't pay cash for an "I want", you could be asking for trouble. jmho :redface:
 
Henning said:
Depends no what the difference in terms is. If your capital is more productive than the cost of the loan, one is best off using borrowed capital.
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Exactly - a 4% loan when your money made 15% last year makes sense to me...Also with inflation, your loan becomes cheaper over time since the payment stays the same but your buying power goes down
 
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