Roadblocks in purchasing a plane. What can I do?

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Years ago, banks figured total installment debt was supposed to max out around 36% of gross income. Don't know what the limits are now. So if you made $10,000 a year, then $3,600 would be your max annual installment debt. So $300 a month for all your monthly obligations. Credit cards, car loans, mortgage.
 
EchoKilo said:
Noted. Everyone where I work does it. I started this job by reporting everything. Then everyone was like "why do you do that?" Even my mom said that. I was like okay okay, I stop reporting everything.
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Listen to your mother, and go find another job where you don't get pressured into questionable activities.
 
This is one reason why I have long advocated eliminating both the lower minimum wage for servers and the concept of tips. The great majority of tip earners intentionally under report their income and thus do not pay their fair share of taxes. Just have the employer pay them the standard minimum wage and eliminate tips. Then all of their income will be taxed just like all of mine is.
 
donjohnston said:
Okay guys... The horse is dead. Can we move on now?
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Not going to happen until we at PoA apply more advanced strategies such as:
  1. Buying a stronger whip.
  2. Changing riders.
  3. Threatening the horse with termination.
  4. Appointing a committee to study the horse.
  5. Arranging to visit other countries to see how others ride dead horses. (Kenyan MCAs eh, Kenyan MCAs ah!)
  6. Lowering the standards so that dead horses can be included.
  7. Re-classifying the dead horse as 'living impaired'.
  8. Hiring outside contractors to ride the dead horse.
  9. Harnessing several dead horses together to increase the speed.
  10. Providing additional funding and/or training to increase the dead horse's performance.
  11. Doing a productivity study to see if lighter riders would improve the dead horse's performance.
  12. Declaring that the dead horse doesn't have to be fed, it is less costly, carries lower over head, and therefore contributes substantially more to the bottom line of the economy than do some other horses.
  13. Re-writing the expected performance requirements for all horses.
  14. Promoting the dead horse to a supervisory position of hiring another horse.
 
EchoKilo said:
Lessons learned:
1) Report my tips.
2) Establish credit.
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FYI, #2 is simpler than you think. Paying rent, utilities, cell phone service, and other subscription items in full and on time helps in a big way. These items are reported to the credit bureaus. So is paying on time.

Also, the free app, Credit Karma, can help in tracking and improving your FICO scores.
 
AggieMike88 said:
FYI, #2 is simpler than you think. Paying rent, utilities, cell phone service, and other subscription items in full and on time helps in a big way. These items are reported to the credit bureaus. So is paying on time.

Also, the free app, Credit Karma, can help in tracking and improving your FICO scores.
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Apparently they don't get reported on mine. I pay car insurance and various other bills and subscriptions. Still no credit. Just checked.
 
OP, make sure you check VREF on the value of the plane. Lenders are going to calculate the value there, and that down payment AOPA mentions will end up being much more.

If the asking price is signficantly more than VREF, you need to negotiate with the seller...and be prepared to walk away to save your cash for the right deal.
 
I have a simple rule. If I have to borrow money for an airplane, I can't afford that airplane. I might borrow against equity in my house, but even that rubs me wrong. I don't like debt and I don't care for banks.

Besides, buying the plane is only the beginning. Feeding and maintaining it are expensive. If the initial down payment is a stretch? You're setting yourself up for a tough road.
 
WannFly said:
Classic POA fashion this is now going to turn into advise on finance and what people should buy upon approval from SGOTI
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Turn into? The OP asked for advice on how to finance it.
 
EchoKilo said:
Apparently they don't get reported on mine. I pay car insurance and various other bills and subscriptions. Still no credit. Just checked.
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Might not be an obvious entry such as credit cards or debt products, but the info does become part of your file.
 
How to finance it? Play the game. Report your income and accumulate wealth. Or get on the internet, talk about how you make plenty of money but cheat in your taxes, and by the way, can't afford to pay cash or even pay a significant down payment.
Yep, some people have no business buying airplanes.
 
blurceo said:
SOFI, Lightspeed by Suntrust, Local Credit Union.
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If my lack of credit and income issues prevent me from getting financed through AOPA, how will SOFI, Lightspeed, or Local Credit Union be any different?
 
EchoKilo said:
Lessons learned:
1) Report my tips.
2) Establish credit.
3) Save money and buy it outright.
4) Don't raise this topic on the internet.
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There ya go!
And don't take advice from people who cheat and then ***** how the "rich don't pay their fair share." I guarantee they are the same people.
 
EchoKilo said:
If my lack of credit and income issues prevent me from getting financed through AOPA, how will SOFI, Lightspeed, or Local Credit Union be any different?
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They won't. You are not "economically viable" yet.
 
EchoKilo said:
If my lack of credit and income issues prevent me from getting financed through AOPA, how will SOFI, Lightspeed, or Local Credit Union be any different?
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Different lenders will have different criteria and standards for who qualifies. WIth just $5K in income I doubt anyone will lend at all.
 
@EchoKilo other folks have covered the personal finance stuff. I’ll just say “don’t buy it until you can pay cash”.

But anyway...

Do some math on this.

How many hours do you plan to fly it in a year and how many years will you own it?

Many people say the rule of thumb is not to buy but to rent until about 100 hours a year.

Remember that’s two hours a week every week all year long, or you make it up in good weather.

Let’s just do some round numbers here.

Let’s say you keep it two years and then want to move up to something bigger. $26,000. $13,000 a year not including interest on the loan.

$130/hr to own that airplane before you maintain it, fuel it, pay for a tie down spot or hangar (probably not a hangar), or fly it.

Let’s fuel it. What’s a 150 burn? 8 gal/hr? $800

$138/hr with fuel.

Let’s get it a cheap annual where nothing’s found to be wrong (unlikely on a new-to-you airplane), call it an AMU. $1000

$148/hr with fuel and annual.

What are tie downs going for in your area? You can do the math on that one.

It’s got a fairly low time engine but let’s say you fly it a year and it has problems at annual that seem to indicate a sticky valve or other top end problems. Maybe get lucky and pay $5000 to get it back airworthy? That’s another $25/hr over the full two years, or just call it an additional $50/hr in the final year of ownership.

Now you get to decide... you going to charge yourself an hourly rate to replace the engine sometime around TBO? Maybe use a little of it if an engine problem arises? Or do you have the cash handy to just pay it if it happens?

Anyway, point is... your hitting just below rental Skyhawk rates in many areas of the country on this 150/152 already — at $26,000 over two years. And you’re above what most 150/152s rent for.

Yes, it’s nice to be an owner and have the keys and jump in and go and not worry about who’s been beating up the airplane at the club and all that... but... you want to figure out if you’re flying enough that you’re at least staying under rental rates.

Keep it longer, the numbers get better rapidly but many people won’t keep a two seater that long, in my experience with watching other owners. And the longer you keep it the more likely that engine work will be involved.

Rental: Engine has a problem at annual or 100 hour...? Not your problem. Rent anything else and keep flying.

Owner: Not so much. Need to be prepared to dump large amounts of so called “disposable” income into any airplane just to keep it airworthy at any particular time.

How motivated will you be to keep it flying when it’s costing you $50/hr more than the rental at the local club? You probably won’t have that problem with a low time engine, but this is why a high time engine 150/152 rapidly depreciates the whole aircraft by engine numbers. The airframe isn’t worth much. The engine is almost the full price tag on an aircraft that small.
 
Stewartb said:
I have a simple rule. If I have to borrow money for an airplane, I can't afford that airplane. I might borrow against equity in my house, but even that rubs me wrong. I don't like debt and I don't care for banks.

Besides, buying the plane is only the beginning. Feeding and maintaining it are expensive. If the initial down payment is a stretch? You're setting yourself up for a tough road.
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This^^^.
I was going to say the same. It will sound harsh, but if you have to finance an 18k airplane, you can’t afford to own an airplane. This isn’t trying to be a spoil-sport, it’s reality. I should know. I had to sell mine because I underestimated what it would cost to care and feed, and overestimated how much I was going to be able to use it. Easy to do.
 
The costs would be more like this:

Finance payment: $195/mo (roughly)
Insurance: $60/mo
Fuel: $200/mo
Hangar: $85/mo (community hangar at local airport)
Annual: $250/yr (guy I know)
Total Monthly: $560/month

About $70/hour

And I plan to keep the plane for a long time. I like 150s. I'm kind of an "enthusiast".
 
You still need to determine what “long time” is to add a depreciation number to your list. My example of two years may be too short, but most people experience at least one major life change every seven years or so. Marriage, kids, divorce, illness, housing change or moves, etc... the numbers say seven years.

You’re losing money either on resale or on paying for a rebuild on the engine (and to a lesser extent the airframe) every hour it runs.

Same thing happens with cars which is why so many people are constantly “car poor” and when something really bad happens they end up financed “upside down” in them where the loan payoff is higher than the vehicle is worth if sold today.
 
Seeing that I'm in my 20s and never had a girlfriend, my prospects of ever getting married seem extraordinarily low, so we can throw that one away. If anything, my situation can only improve from here. Once I finish school I should have a job paying around $60-$70k.
 
Please don't take this the wrong way, but you are underestimating the cost.

Your fuel cost only allows about 9 hours a month at $4.50/gal.
Your annual assumes nothing is wrong at all (that just won't happen) and is unlikely to cost nearly as little as you think.
You have not accounted for oil changes or analysis.
You have not accounted for taxes or state registration.
You have not accounted for random maintenance. This is a big one. I just spent $1200 on fixing a sticky valve. That sort of maintenance issue can come up at any time.
 
EchoKilo said:
Seeing that I'm in my 20s and never had a girlfriend, my prospects of ever getting married seem extraordinarily low, so we can throw that one away. If anything, my situation can only improve from here. Once I finish school I should have a job paying around $60-$70k.
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LOL. Ahh to be young again... :) We all believed those things once, too, you know. :)

Your odds are pretty high for both the pay increase and finding the “love of your life”, just going by the statistics. Or at least the love of your first divorce, which the stats are pretty damn high on, too.

But odds being odds, that means there’s a certain percentage that go the other direction, too.

Good friend of mine... entrepreneur... fast track... 20s... making big bucks... moved to chase a startup that truly sounded great... got married... went well for about three years. World was his oyster....

Life arrived. Wife fell into depression and suicidal tendencies with a family history of severe clinical depression of women in their late 20s and early 30s...

Business he was working for a few people dug in and realized it was a shell company for money laundering and now he’s a listed executive of the firm and aware of the fraud...

Illness strikes and he’s knocked out of commission for six months recovering...

As soon as he’s well he immediately quits the big job and moves far away after finding out not only is it money laundering but those doing it are threatening violence against other people if they talk...

Wife falls further into depression and needs to be treated as in-patient... eventually she requests a divorce but still ends up with half his assets...

And now he’s jobless...

He’s doing great today. Rebuilt his life. New wife, two great kids, lots less money, no longer chases the wild entrepreneur stuff, but still builds new business plans...

He went through seven years of hell.

Young, you THINK nothing like that will happen to you. And you should. Hope springs eternal.

But... the statistics don’t back it up.

They do back it up for your salary increasing at your age, assuming you’re busting it. And I’m sure you are. Experience counts.

The rest? Dice roll. Most of what keeps humans around on the planet is our adaptability.

But it or don’t buy it, but life WILL change. Not always for the better.

Learned to fly at 19. Then later, I didn’t fly for eight years pending fixing some serious misunderstandings I had about finance. Now I know how to feed my aviation habit without bankruptcy. Even slowly starting to get paid to teach it.

I won’t finance anything that depreciates anymore ever, if I can possibly avoid it, unless someone’s giving me one hell of a tax break to even it out.
 
denverpilot said:
LOL. Ahh to be young again... :) We all believed those things once, too, you know. :)

Your odds are pretty high for both the pay increase and finding the “love of your life”, just going by the statistics. Or at least the love of your first divorce, which the stats are pretty damn high on, too.

But odds being odds, that means there’s a certain percentage that go the other direction, too.

Good friend of mine... entrepreneur... fast track... 20s... making big bucks... moved to chase a startup that truly sounded great... got married... went well for about three years. World was his oyster....

Life arrived. Wife fell into depression and suicidal tendencies with a family history of severe clinical depression of women in their late 20s and early 30s...

Business he was working for a few people dug in and realized it was a shell company for money laundering and now he’s a listed executive of the firm and aware of the fraud...

Illness strikes and he’s knocked out of commission for six months recovering...

As soon as he’s well he immediately quits the big job and moves far away after finding out not only is it money laundering but those doing it are threatening violence against other people if they talk...

Wife falls further into depression and needs to be treated as in-patient... eventually she requests a divorce but still ends up with half his assets...

And now he’s jobless...

He’s doing great today. Rebuilt his life. New wife, two great kids, lots less money, no longer chases the wild entrepreneur stuff, but still builds new business plans...

He went through seven years of hell.

Young, you THINK nothing like that will happen to you. And you should. Hope springs eternal.

But... the statistics don’t back it up.

They do back it up for your salary increasing at your age, assuming you’re busting it. And I’m sure you are. Experience counts.

The rest? Dice roll. Most of what keeps humans around on the planet is our adaptability.

But it or don’t buy it, but life WILL change. Not always for the better.

Learned to fly at 19. Then later, I didn’t fly for eight years pending fixing some serious misunderstandings I had about finance. Now I know how to feed my aviation habit without bankruptcy. Even slowly starting to get paid to teach it.

I won’t finance anything that depreciates anymore ever, if I can possibly avoid it, unless someone’s giving me one hell of a tax break to even it out.
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Nah man, I'm pretty damn lazy, and pretty damn stupid too. Not putting myself down, but I can see that I have a pretty defective brain. I make the same stupid mistakes over and over again. Not just on big the things, but the little things too. I never learn from them. I also have very little knowledge of the world and how it works. I'm completely lost on most things. I wish I could go back and value learning more than I did. I'm not that young anymore at 27. Should have at least some parts of my life together by now, but I don't.
 
EchoKilo said:
Nah man, I'm pretty damn lazy, and pretty damn stupid too. Not putting myself down, but I can see that I have a pretty defective brain. I make the same stupid mistakes over and over again. Not just on big the things, but the little things too. I never learn from them. I also have very little knowledge of the world and how it works. I'm completely lost on most things. I wish I could go back and value learning more than I did. I'm not that young anymore at 27. Should have at least some parts of my life together by now, but I don't.
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Pffft. You think any of us older folk have our lives together? :)

Trust me. Most of us don’t. It just looks like we do.

Mostly because we figured out it’s a lot safer to go to friend’s houses and discuss how we don’t have it together yet, over a bottle of wine on a weekend night, instead of doing any of the stupid stuff we did in year’s past.

Like... having that discussion at a whiskey bar at 2AM on a Wednesday morning when we all had to be at work by 6. :) Funny memory, but stupid.

Just find a few old guys who will admit they screwed up and ask them what they did, and then don’t do what they did ... and you’ll avoid most major problems.

Some will still come along, but the big ones can be avoided.

An airplane payment around your neck with a busted engine and no money to fix it? That can be avoided.

Be careful. Some of us may have seen that particular “stupid human trick”. Or lived it. :) :) :)

While I didn’t heed the advice, there’s a lot of wisdom in the joke...

“If it flies, floats, or f***s... rent it.” :) :) :)

Most of us here have stories that’ll agree for at least one of those items. And maybe not for others.
 
It doesn't sound like you have the time or cash to fly enough to benefit from being the sole owner. Have you considered finding a partner or two? Sure, it's a headache to set up, and will take longer to find that person/people. But, your costs are halved (upgrades, fixes, carrying costs, etc) and so is the paperwork.

I'm in a 4-way partnership on a 172 and each owner has enough cash to by the other 3 out, yet we continue because of these benefits.
 
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