Plane financing

[mtuomi]

If you really can make 15% return on your money! then borrowing should be done in your margin account at your brokerage firm and you will be a bazillionaire shortly. And, margin loans are always some of the lowest interest loans around.

If one has the prowess to make 15%, one should not be looking for a ratted out 172, but should be looking for something with a pilot in front and a well stocked bar in back.

15% return off $10 is 1,5 bucks. Unfortunately I do not have enough capital yet on my investments to retire to the back seat.

 

[mtuomi]

Oh, I shouldn't say anything, but we need more aviators and there are a few things the OP posted that indicate a different situation than what we typically see here. I typically look at threads like this and say "YEA -WHAT THEY SAID" as the OP is typically:

- A young 20 something that just got his PPL and is still renting and needs to buy a car to get to work. Airplane financing is a bad idea.

- The 30 something that has a ARM house loan, two car payments and the wife is still popping out little ones. My recommendation: booze - not and airplane (ok, sounds like hell to me).

All I will say about my personal experience is that I was the 30 something that nearly got everything paid off - and then decided I was making too much money and started a business. Wow - that has been an experience. Back in 2005, things finally started coming together, but I was burned out. A flight in my uncle's Luscomb sold me on flying and I started jonesing for an airplane. Bumped over to the red board where folks like Henning talked me out of buying one - thankfully as 2008 happened and, well only you business owners will have any idea about what I might write next.

Before I deliver my useless recommendation, I have a question for the rest of you: do you really keep $50K/$100K or more in savings? If so, I'm not sure I agree with keeping that much money on the sidelines - buy a building or invest in the market and make 5-10% per year pretty easily. (The only guy I knew with a bank account with those figures in it flew around in a Falcon 20 - I think he has upgraded since then.)

Like I noted above, I pulled a 5 year note on mine. Yes, I did have other options, but why? $2K is the total price of the loan in my case and didn't affect anything else I have going on. If the OP is in a similar situation - go for it - we need more aviators. If not, wait until you can also afford the crazy maintenance bills - again we need more aviators and poor maintenance is a great way to kill yourself.

When in doubt - read my signature.

Thanks!

I've ran my own business since 2004, so I know what it's like. Thankfully my business doesn't really depend on markets going up and down. If something, my business goes up when the markets go down. I'm very lucky with that.

Did you go through a specialist, or just went through your bank? Did you have any issues with the lender when you presented your case, saying you want to buy a plane that is almost 70 years old?

 

[mtuomi]

Yeah, buy what you want and enjoy it while you can. If you are thinking of a long term purchase plane, assuming you plan on having it for the life of the loan, you may save money in the end of the ownership cycle by increasing your purchase budget, of course that increases future risk levels if that figures in. Most of what you can buy for $35k will either be very limited in capability or condition, this sets you up for elevated future costs in either upgrading the plane or stepping up to another in the future, so weigh your needs carefully and make sure you get the most value for your dollar.

This is a very good point, although veering slightly off-topic here. I know we should all buy the last plane first and so on, but I am slightly hesitant on jumping "all in", without knowing the ins and outs of what plane ownership is like.

I saw your calculations about the whole ownership costs you had with your 310, and I could easily afford that. But that is the only real and realistic calculation I've seen for something with even remotely comparable capability as you had.

What I really, secretly, would like, is a Mooney M20J. But I've never seen a calculation such as yours for one. That is why I would be tempted to start with a "starter" plane, such as a 172, and learn the hurdles of ownership before jumping all in to the "last" airplane.

 

[brian]]

Just give NAFCO a call - that's pretty much all I did. Basically if they said, yes, they got my business. Otherwise, I wrote a check for the full amount. Turns out they were very easy to work with.

You might give them a call up-front as they might have some pre-buy good advice. However, they will want the serial# and details from your pre-buy (I strongly recommend a full annual afterwards - these dam things have hidden warts). With the details, they they shop the loan for you to a number of different banks. I think I ended up with Pilot Bank - again, pretty easy to work with.

Give them a few weeks though - and let the seller know as it will extend the process a little.

I had a feeling you were a business owner. On that point, you might consider the aircraft will cost another $20K/year to operate / fly. It will likely be a little more the first couple of years - the reason (thankfully) I kept the money in the same account. (Look for another thread on that later.)

 

[Henning]

This is a very good point, although veering slightly off-topic here. I know we should all buy the last plane first and so on, but I am slightly hesitant on jumping "all in", without knowing the ins and outs of what plane ownership is like.

I saw your calculations about the whole ownership costs you had with your 310, and I could easily afford that. But that is the only real and realistic calculation I've seen for something with even remotely comparable capability as you had.

What I really, secretly, would like, is a Mooney M20J. But I've never seen a calculation such as yours for one. That is why I would be tempted to start with a "starter" plane, such as a 172, and learn the hurdles of ownership before jumping all in to the "last" airplane.

The M20J will be about halfway in cost between a 172 and my 310 on average.

 

[DakotaGreg]

I have purchase 16 aircraft in the last 18 months, so have done a lot of financing.
The following contacts will do over 85% of the aircraft loans.
Contact: 1. AOPA and use their financing 2. Airfleet Capital 3. US aircraft Finance 4. Lightstream
Try all of these first. Additionally, try your local bank for a loan in the 20 to 25K range.

 

[brian]]

Also adjust UP on the MX and hangar costs - this appears to be the NYC area !!

(I live out in the boonies where things are a LOT less expensive. That mooney might cost as much as the 310 in NYC..)

 

[Bill]

What I really, secretly, would like, is a Mooney M20J.

Then do it. I don't have hard numbers, but I don't believe the 201 to be a far jump from the 172 cost wise. Find a good one and it will serve you well, they are robust airplanes.

 

[mtuomi]

Also adjust UP on the MX and hangar costs - this appears to be the NYC area !!

(I live out in the boonies where things are a LOT less expensive. That mooney might cost as much as the 310 in NYC..)

Part of the reason why I really want that plane is that we might have to relocate thanks to my better half, so I want something in return for that
We might end up in SC...

 

[mtuomi]

Then do it. I don't have hard numbers, but I don't believe the 201 to be a far jump from the 172 cost wise. Find a good one and it will serve you well, they are robust airplanes.

Do you have any similar cost analysis as Henning had on his other thread?

 

[Sam D]

This is a very good point, although veering slightly off-topic here. I know we should all buy the last plane first and so on, but I am slightly hesitant on jumping "all in", without knowing the ins and outs of what plane ownership is like.

I saw your calculations about the whole ownership costs you had with your 310, and I could easily afford that. But that is the only real and realistic calculation I've seen for something with even remotely comparable capability as you had.

What I really, secretly, would like, is a Mooney M20J. But I've never seen a calculation such as yours for one. That is why I would be tempted to start with a "starter" plane, such as a 172, and learn the hurdles of ownership before jumping all in to the "last" airplane.

You make a good point. The more "fuzzy" that last plane is the harder it would be for me to buy it first. I think the "last plane first" advice works better in the situations where there is a planned upgrade path (e.g. "I'm going to buy a 172 to train in now but really plan on a 182 in a year or two")

 

[Henning]

You make a good point. The more "fuzzy" that last plane is the harder it would be for me to buy it first. I think the "last plane first" advice works better in the situations where there is a planned upgrade path (e.g. "I'm going to buy a 172 to train in now but really plan on a 182 in a year or two")

It works best whenever you know the requirements of what you want the plane to do for you. All planes are compromises of various factors with one major constant, Load * Speed = $$$. Light and slow is cheap, heavy and fast is expensive. All comparable planes in the same horsepower range will cost virtually the same to own and operate regardless of make and model.

The thing about GA is there are so many different missions that you have to sit down and not only establish your requirements, but also look at your local rental market and see which requirements can be filled through rental. For instance, I would not buy a 172, it does not fulfill many of my requirements, and when it is the best choice for a flight, they are ubiquitous rentals that I can use cheaper than owning. If I decided to buy something, it will fill the requirements of what I cannot rent.

 

[mtuomi]

It works best whenever you know the requirements of what you want the plane to do for you. All planes are compromises of various factors with one major constant, Load * Speed = $$$. Light and slow is cheap, heavy and fast is expensive. All comparable planes in the same horsepower range will cost virtually the same to own and operate regardless of make and model.

The thing about GA is there are so many different missions that you have to sit down and not only establish your requirements, but also look at your local rental market and see which requirements can be filled through rental. For instance, I would not buy a 172, it does not fulfill many of my requirements, and when it is the best choice for a flight, they are ubiquitous rentals that I can use cheaper than owning. If I decided to buy something, it will fill the requirements of what I cannot rent.

My main reason on thinking about buying is multi-day trips away. Rentals cannot serve this mission for me. I want to fly out for a few hours, and spend 3-4 days there, and then fly back. There is no rental that would suit this mission.

 

[Henning]

My main reason on thinking about buying is multi-day trips away. Rentals cannot serve this mission for me. I want to fly out for a few hours, and spend 3-4 days there, and then fly back. There is no rental that would suit this mission.

Yep, some markets are tougher to find that in than others, if you don't have them in your market, you have to own. The question then become what to own. That revolves around how far you're going and how much you need to get there.

 

[EdFred]

I did the HELoC at 2.25% and paid it off in <4 years.

 

[mtuomi]

Yep, some markets are tougher to find that in than others, if you don't have them in your market, you have to own. The question then become what to own. That revolves around how far you're going and how much you need to get there.

Usually, people say buy the plane that fulfills 70% (or whatever%) of your missions, but rent the rest.

For me, it is the other way round. I could rent for 70% of missions, but for the rest, there is no chance.
And the rest, is what I enjoy the most.

This can easily turn into a "what should I buy" topic, we are already so far off topic that it is unreal, but there are already too what to buy topics...

For the people saying you should never have debt, perfect. Let us agree to disagree with our views.

I've received a few of very good recommendations, I'll look into them more. I'm also more than happy to hear more real world figures about finances. PM's are fine.

 

[Henning]

Usually, people say buy the plane that fulfills 70% (or whatever%) of your missions, but rent the rest.

For me, it is the other way round. I could rent for 70% of missions, but for the rest, there is no chance.
And the rest, is what I enjoy the most.

This can easily turn into a "what should I buy" topic, we are already so far off topic that it is unreal, but there are already too what to buy topics...

For the people saying you should never have debt, perfect. Let us agree to disagree with our views.

I've received a few of very good recommendations, I'll look into them more. I'm also more than happy to hear more real world figures about finances. PM's are fine.

Debt is only a problem if you think money is valuable, it isn't. The worst that can happen is you get a bad credit report.

For financial figures, you need to concern yourself with those figures from your region, because the fixed costs and maintenance costs, heck, even fuel costs, can vary over 100% between different places around the country.

 

[silver-eagle]

I wonder how many people would react to a friend asking for advice about where to get a loan for a toy by telling them they were not being financially responsible. That is, if they were talking to them in person. Or maybe I don't hang around the poker table enough.

Like previously stated, finance is like religion and politics. Best avoided in conversation.
That said, buy all the damned toys you can, go whereever the hell you want, and have fun at it. We all only pass this way once and if you want to own a plane, after all you DID get a license to fly, then buy one.
I went to a local bank for 90% of the purchase. At the same time, I refinanced my house to a lower interest, shorter term, lower monthly, and took enough extra to cover the price of the plane. As it turned out, both were approved the same day. I took the refi and not the bank.
I've owned the plane for 10 years.

 

[petrolero]

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...

It will be a piece of cake to finance that amount assuming reasonable income.

I used Bank of America for mine. Their Aircraft lending group is out of Alpharetta, GA and they were very flexible when my purchase got delayed by 3 months.

 

[Jimmy cooper]

If you really can make 15% return on your money! then borrowing should be done in your margin account at your brokerage firm and you will be a bazillionaire shortly. And, margin loans are always some of the lowest interest loans around.

If one has the prowess to make 15%, one should not be looking for a ratted out 172, but should be looking for something with a pilot in front and a well stocked bar in back.

Harry maddof had that prowess! It seems a Gulfstream would be in order.

 

[mrkbbd]

If you really can make 15% return on your money! then borrowing should be done in your margin account at your brokerage firm and you will be a bazillionaire shortly. And, margin loans are always some of the lowest interest loans around.

If one has the prowess to make 15%, one should not be looking for a ratted out 172, but should be looking for something with a pilot in front and a well stocked bar in back.

I think most people have been averaging >10% the last few years without trying...no-load, passive mutual funds

 

[Henning]

I think most people have been averaging >10% the last few years without trying...no-load, passive mutual funds

Heck, I'm over 15% in the last month. However, that's not really accurate, because it's unrealized, it is just an imagined gain. Not until I convert the investment I make into a real good, a product I need. Not until I can make a comparison of buying power at both ends of the cycle can I rate the financial worth of an investment.

That thinking though misses the real importance of investment, what that money did to advance mankind's situation. Did that investment make the world a better place, or did it just make a bunch of money while wasting a bunch of resource? That is what "Interest" is meant to be.

 

[gitmo234]

I think most people have been averaging >10% the last few years without trying...no-load, passive mutual funds

When the market started crashing ~2005ish I doubled down and threw my money into the riskiest retirement account options and doubled my contributions.

It was only the past month or two that my twelve month rate of return has dropped down to 10%. For a very long time it was between 18%-22%.

Its not forever, but I have a long, long time until retirement so I'll keep riding this until it drops down again and do it again. Heck, even my investment app on my phone (similar to BoA keep the change, except it invests in mutual funds) is between 3-5%

 

[JHW]

...Before I deliver my useless recommendation, I have a question for the rest of you: do you really keep $50K/$100K or more in savings? If so, I'm not sure I agree with keeping that much money on the sidelines - buy a building or invest in the market and make 5-10% per year pretty easily. (The only guy I knew with a bank account with those figures in it flew around in a Falcon 20 - I think he has upgraded since then.)

yes, I keep a year's worth of living expenses in a plain old savings account. It's peace of mind in an uncertain world and if something happens to me, my wife and kids can keep on with life without having to worry about jumping through hoops to quickly claim the life insurance and settle the estate. Lots of us joe-average people keep cash on hand without chasing the highest yield with every dollar. If the principle is at risk, it's not serving its purpose.

 

[brian]]

yes, I keep a year's worth of living expenses in a plain old savings account. It's peace of mind in an uncertain world and if something happens to me, my wife and kids can keep on with life without having to worry about jumping through hoops to quickly claim the life insurance and settle the estate. Lots of us joe-average people keep cash on hand without chasing the highest yield with every dollar. If the principle is at risk, it's not serving its purpose.

Cudos... Then again, I'm guessing you are at least my age.

I'm preparing a presentation for our company monthly meeting to get my young employees to think more seriously about saving. High risk, low risk, or even a bank account CD - I have a tough time convincing some them to save $50/month. Even as a 20 something I couldn't "not save" - I just don't get blowing everything on junk that ends up in the landfill. But I've just not been much for huge amounts in the bank. I guess it goes back to that religion comment above.

 

[Henning]

Cudos... Then again, I'm guessing you are at least my age.

I'm preparing a presentation for our company monthly meeting to get my young employees to think more seriously about saving. High risk, low risk, or even a bank account CD - I have a tough time convincing some them to save $50/month. Even as a 20 something I couldn't "not save" - I just don't get blowing everything on junk that ends up in the landfill. But I've just not been much for huge amounts in the bank. I guess it goes back to that religion comment above.

Because that is how our economy operates, if you don't spend, our economy collapses. The economy doesn't want you to save.

 

[EdFred]

Because that is how our economy operates, if you don't spend, our economy collapses. The economy doesn't want you to save.

Going back to Econ, I was told everyone needs to spend 95% of their earnings to keep the economy rolling. I am not doing my part anymore.

 

[JoseCuervo]

I think most people have been averaging >10% the last few years without trying...no-load, passive mutual funds

I first walked on the trading floor of the New York Stock Exchange in April of 1988 wearing a cheap suit and expensive tie. (I always liked nice ties). I have bought and sold seats on 3 different exchanges.

Yes, I have made far more than ">10% the last few years without trying", and, in fact, more than that because I try. I also remember my returns in 2008. And my returns in 2000. And my returns on October 1987. There have been some major corrections, lasting more than a year, that make it foolhardy, in my opinion to believe that borrowing money at low rates and playing interest rate spreads is a good solution for an undercapitalized investor.

And when someone thinks they can make 15% annually! there are plenty of people who would PAY for that service as that is some pretty rarefied air. Not sure that Warren Buffet even comes close to that.

(That being said, I have some VERY risky investments that have been doing better than that, but, they are not scalable above a few $100k and their risk is much greater than a "passive" investment. Hence, I don't have a plane with a bar in back, but, instead an Igloo SwingMate cooler with a few bottles of IPA in it).

 

[evapilotaz]

This thread is Lame.

 

[Henning]

Going back to Econ, I was told everyone needs to spend 95% of their earnings to keep the economy rolling. I am not doing my part anymore.

Which is why our economy is in a constant process of failure. It is only propped up by faith and imagination, huge infusions of new cash that come out of nowhere. It's a crap system, and I don't finance anything because I don't want to play in their sand box because it is full of turds. Cash has always suited me just fine, and I have never really lacked for anything I wanted.

 

[Midwest_Wings]

Brian, what does "took out a 5 year note" mean? TIA.

 

[brian]]

Brian, what does "took out a 5 year note" mean? TIA.

I just have a 5 year term on the note - all paid off at the end of 5 years. (Assuming I keep with the monthly payments and don't pay it off early.)

(Although I don't mind borrowing money, I don't think I like the idea of a flying mortgage. My first house was $65K and I know folks that have airplane loans for more. That would keep me up at night ... )

 

[brian]]

This thread is Lame.

OK, I'll bite - why lame?

 

[somorris]

I have a friend who's motto is "Whoever dies owing the most money wins." .

 

[Checkout_my_Six]

$100,000 in the bank is more useful....than in the hangar.

therefore....I'd rather have the cash and finance the plane.

 

[paflyer]

$100,000 in the bank is more useful....than in the hangar.

therefore....I'd rather have the cash and finance the plane.

Agree. I used a HELOC to pay for my plane but always had the cash ready to pay it off (as well as a full engine rebuild) if necessary/desired. 2.5% money, recalculated monthly on outstanding balance, paid it off aggressively in about 4 years. Cash gives you options. Try to get a loan when the chips are down.

 

[paflyer]

Because that is how our economy operates, if you don't spend, our economy collapses. The economy doesn't want you to save.

Right, so the Federal Government should take all of that saved money from the people (and corporations) that earned it and give it those who will spend it. Sound like a plan?

 

[EdFred]

Right, so the Federal Government should take all of that saved money from the people (and corporations) that earned it and give it those who will spend it. Sound like a plan?

They could provide incentives for spending, but that wouldn't go over so well with the people that don't understand economics. (Poor people.)

 

[Henning]

Right, so the Federal Government should take all of that saved money from the people (and corporations) that earned it and give it those who will spend it. Sound like a plan?

That is why we instituted Welfare, to grow Capitalism, that is why we have sent our manufacturing industry to China, to give people who had no money to spend, money to spend so they could be consumers too. The consumer market quadrupled since Nixon went to China. Understand this is all part of the plan, how Consumerism as an economic model has to work. Henry Ford hated himself for starting it, he didn't envision the consumer credit market that didn't exist prior to his $5day wage so his workers could afford to buy the product they built, Ford loathed the financial industry due to his early days in the car business and how they held him back. That's why he bought all his stock back and wholly owned Ford Motors until the day he died.

The inverse redistribution of wealth scheme that we have is like bouncing a ball through a basket. The dollars start mid level, get bounced to the very bottom of society, then head up and in the basket.

You blame the Government, but Government is a transitory being. Government does not end up with money, that money gets spent. The financial industry runs the western governments, it has for hundreds of years, it's who the Founders fought a revolution to escape. The same entities were handed back control of the country in 1913 with the Federal Reserve Act. It is the Chairman of the Fed who sets economic policy and direction, and it is the families who own the banks that own The Fed that give him his directions. They are the architects of The New World Order. The objective is to take their Ponzi scheme global, and they have. The same families have been in this position for hundreds of years, so calling it a New World Order is a bit misleading because it's just an aggrandizement of the plan that has been around forever, just made possible through consumerism.

 

[jmp470]

What I don't understand is why people would buy a plane with their own money... take a note out on the plane....