Roadblocks in purchasing a plane. What can I do?

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EchoKilo

Pre-takeoff checklist
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EchoKilo
So I found a Cessna 150 I want to buy. It can be seen here: https://www.controller.com/listings/aircraft/for-sale/24647841/1971-cessna-150

I got a quote from AOPA on financing and they said 85% of the either the value or purchase price (whichever one is lower) could likely be financed, which would make my down paylent roughly $3,800- $4,000. Likely interest rate of 6.5%, and a max term of 10 years. This would make my payments somewhere around $225- $250 per month. Insurance for me (quoted by AOPA) would be roughly $600- $700 per year, or $50- $60 per month. Not bad!!

BUT WAIT! Here's where the issues start:

I noticed that AOPA's website says that eligibility is determined by reviewing income records of the applicant. But the problem is this - I work at a luxury hotel in the hospitality industry, where my income is mostly based on tips. As is common practice at my place of work, not everything gets reported. As a result, only a small portion of my income is reflected on my W2. As employees where I work, we are encouraged to not report everything we make. We usually report the minimums to stay within minimum wage so the company does not have to make up the difference. My true income is much higher than my records would suggest. I know this sounds nefarious, but that's the way it is.

The second issue is the fact that I have no established credit. Do you think they would allow a cosigner?

What should I do? I really want to buy this plane. I've run the numbers and I know I can afford it. I currently rent a 172SP for $140 per hour and I probably fly 1-2 hours per week in it. Owning this 150 would cost 1/3 of that of you break it down by the amount of hours I currently fly the 172SP.

Someone give me some advice. Thanks!!
 
Can you come up with a larger down payment? The banks rely on your tax records ,for their loan decisions.
 
frfly172 said:
Can you come up with a larger down payment? The banks rely on your tax records ,for their loan decisions.
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20% is about the max of what I can do. I'm a poor kid. I don't have $10,000- $15,000 lying around. If I did, I would just save up a little more and buy it outright instead of financing. Either way, they'd either lower my term or jack up my interest rate to make the payments about the same.
 
I hate to be harsh, but your cheating on your taxes is coming back to haunt you. Not judging you, but realize it is causing you problems now.

Rate is a little high, I just financed at 5% but put 25% down. I also have a balance sheet the banks like. Good luck, maybe get a part time job to increase your reported income, but I expect you will have to wait a year or so.

Only other thought is borrow from family or get a co signer.

Jim
 
File an amended tax return to correct the problems with your reported income.
 
Topper said:
Only other thought is borrow from family or get a co signer.
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What does cosigning actual entail? I know it works with regards to the credit score, but would it circumvent the income problem too?
 
This whole thing is a giant pile of

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The plane is waaaay over priced

Your job, the loan, the whole thing, it's just all really off the cuff sounding like a bad idea
 
EchoKilo said:
What does cosigning actual entail? I know it works with regards to the credit score, but would it circumvent the income problem too?
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Co-signer means they will run a credit ch close on him/her and issue the loan based on his/her income along with yours. If u can’t pay, they will go after the co-signer
 
kyleb said:
File an amended tax return to correct the problems with your reported income.
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How? There are no "problems" with my reported income other than the fact that I didn't report a ton of it. That money is neither here nor there. There's no way to know exactly how much it was. However, just from doing some quick estimating, I can make a good rough guess. I started working at my current job last March. My W2 says my total earnings was about $5,300. At an average of $70 per night in tips, it's roughly $10,000 to $12,000 dollars last year that is not reflected on my W2.

I think my friend ran into this problem when he tried ro refinance his house.
 
By the way, AOPA finance stays away from high time airframe planes. Last I checked anything above 7k they don’t like it. Check on that first
 
WannFly said:
By the way, AOPA finance stays away from high time airframe planes. Last I checked anything above 7k they don’t like it. Check on that first
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Got any recommendations for brokers/lenders I should look into?
 
EchoKilo said:
Got any recommendations for brokers/lenders I should look into?
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I have to dig up some old threads of mine where other people recommended some finance companies. are You a student? If so, some will not lend money to a student. I went thru this crap last year. I will dig up the recommendations when I get to a computer
 
WannFly said:
I have to dig up some old threads of mine where other people recommended some finance companies. are You a student? If so, some will not lend money to a student. I went thru this crap last year. I will dig up the recommendations when I get to a computer
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Oh that would be so cool! Thank you! Just PM me.
 
EchoKilo said:
How? There are no "problems" with my reported income other than the fact that I didn't report a ton of it.
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The problem with your reported income is it isn't accurate. You made an intentional choice there. Actions have consequences. In this case, the consequence is you can't borrow money.
 
Some may disagree but I don't think you should finance a toy. Regardless of your tax situation or this particular aircraft, finance should be reserved for necessities... a home and maybe a car. I'd also finance if it was cheap enough that I could earn more by investing the principal elsewhere.

How will you afford major maintenance?
 
There are serious problems with your reported income. Not reporting your income is called tax evasion and is a serious federal crime.

Once again, I am not judging you, but want you to at least understand what you are doing is breaking the law. Feel free to continue, just understand it is a crime. I doubt anyone is going to track you down, but I would not recommend posting so casually what you are doing.

Jim
 
Topper said:
There are serious problems with your reported income. Not reporting your income is called tax evasion and is a serious federal crime.

Once again, I am not judging you, but want you to at least understand what you are doing is breaking the law. Feel free to continue, just understand it is a crime. I doubt anyone is going to track you down, but I would not recommend posting so casually what you are doing.

Jim
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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.
 
DesertNomad said:
Some may disagree but I don't think you should finance a toy. Regardless of your tax situation or this particular aircraft, finance should be reserved for necessities... a home and maybe a car. I'd also finance if it was cheap enough that I could earn more by investing the principal elsewhere.

How will you afford major maintenance?
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As a means of transportation, why is it considered a toy?
 
paflyer said:
As a means of transportation, why is it considered a toy?
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Unless he is commuting in it, it's a toy, as are most of our planes (mine included).

To the OP: adding $10k to your income will not change your tax much at those low income levels.
 
Can a mod just delete this thread please?
 
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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Here's a similar cause and effect story. Way back when I set up my first corp and I was the only employee. One of the "tricks" that I was told about is after a good year and you take your distributions, you use that as a your pay for the next year. Which means you don't pay yourself a salary. At the end of that year, you haven't received any regular salary and you get an even bigger distribution. The benefit is that distributions are not subject to social security tax. So you effectively save (or make) 15%.

But one (just like not declaring tips), it's illegal. And two, when it's time to collect social security, guess what? You don't get very much because how much you receive is based on how much you paid in. Which you didn't because you were gaming the system.

You're getting some good, solid advice here on the plane (and your filing methods).
 
donjohnston said:
Here's a similar cause and effect story. Way back when I set up my first corp and I was the only employee. One of the "tricks" that I was told about is after a good year and you take your distributions, you use that as a your pay for the next year. Which means you don't pay yourself a salary. At the end of that year, you haven't received any regular salary and you get an even bigger distribution. The benefit is that distributions are not subject to social security tax. So you effectively save (or make) 15%.

But one (just like not declaring tips), it's illegal. And two, when it's time to collect social security, guess what? You don't get very much because how much you receive is based on how much you paid in. Which you didn't because you were gaming the system.

You're getting some good, solid advice here on the plane (and your filing methods).
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Very true. I'm not a nefarious person. I was just doing what everyone else does. I don't want to cheat the system. You live and learn I guess.
 
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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That will not be a defense if the IRS audits you, or you make an enemy and they turn you in. Playing the lottery that you never get caught and be financially ruined and perhaps even see prison time.

I have no sympathy. Anyone can cheat on their taxes, not just service people that get tips. Just because it's easy and everyone does it doesn't make it morally ok.

You're not a chump for paying your legal share. Even if others try to justify their actions by convincing you otherwise.
 
EchoKilo said:
Very true. I'm not a nefarious person. I was just doing what everyone else does. I don't want to cheat the system. You live and learn I guess.
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Yet you are cheating the system. Knowingly.
 
Not to pile on, but whenever I hear about a tax cheat I think- that is money I will have to make up for by paying higher taxes!

More of a local property tax thing, but still applies.
 
Why do I feel some of you are on the phone with the IRS right now?
 
Classic POA fashion this is now going to turn into advise on finance and what people should buy upon approval from SGOTI
 
Unless you're yanking our chain, the way you're misreporting your income may be a crime. And apparently everyone you know knows you're doing it. At some point someone might decide to rat you out. The IRS does have a reward program, so you might need to worry about the one honest guy on your job dropping a dime. Or, you might want to be the guy who drops the dime.
 
Tough crowd! The lending companies are going to use debt formulas and credit history to determine if they will lend you money. Your lower income alone will not disqualify you. However, if you have lots of additional debt, and a checkered credit history, you probably will be turned down regardless. I would call them and ask if they have debt guidelines that could help you determine if you are going to apply.
 
Lenders are going to judge your creditworthiness based on your documented income, assets, and credit history. Your W-2 income isn't enough to qualify for any loan.

If I were in your position I wouldn't buy an airplane. If you're tired of renting, consider a club or partnership.
 
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