Paying for aircraft

[patrol guy]

Driveway - Hang in there. In November of '86 I took an extra $5,000 and started buying and selling stuff aggressively. In November of '87 I bought my first plane, a $6250 Cessna 172 and I still had a little over $5000 left over. I just wish that I kept up that aggressive money making the last 25 years. When there is a will, there is a way.

[Bighorn]

Six years ago I quit smoking ....all proceeds go to aviation.....I was just about a 2 pak a day guy, today along with the savings on health insurance becuase I'm a non smoker equates to just about 6k/year goes along way to my aviation addiction

[dirtstrip]

Six years ago I quit smoking ....all proceeds go to aviation.....I was just about a 2 pak a day guy, today along with the savings on health insurance becuase I'm a non smoker equates to just about 6k/year goes along way to my aviation addiction

Good for you

[Littlecub]

^ ^^^^^

[Grassstrippilot]

Good topic and interesting. I am not currently an out-right owner, but soon hope to be.

In college I bought into a 1/6th ownership in an Apache with the Geronimo conversion for $6,000. Took a loan from Grandma that I paid back that summer with some of my wildland firefighting earnings. At the end of college and shortly after getting married, I sold my share for the same amount. Also during college, I joined a flying club that is set up as a part ownership in the aircraft. When we moved back to UT, I got back in the club and these are the aircraft that I currently fly. I have yet to come across a better deal from a cost perspective and that is after talking to pilots from all over the country.

So now with the family growing, we need a bigger plane. We are debt free with the exception of our mortgage. I have been blessed with a wife that attacks debt like a pitbull. She graduated from college debt free and $10K in the bank. Then here I came along with $60K+ in student loans. But, by being frugal, she had my debt paid off 7 years early. Up until 4 years ago, we both drove our college cars. It wasn't until the birth of our first child that we decided that she needed a more reliable car. The first few car upgrades were partially financed, but again, she attacked it and paid it off quickly. The last car upgrade (needed more seat with the third child) was paid for in cash. A nice feeling.

So, on our way home from Thanksgiving, the subject of owning an aircraft came up again. Luckily she is on board with the idea "when we can swing it" and she told me to start crunching the numbers. The game plan will be like we have approached everything else: pay for as much as we can up front, finance the rest, and pay it off as quickly as possible. I did get from the conversation that, because the way she attacks debt, she had in her mind to pay off the house before thinking of a plane. I told her that I wanted one while the kids still lived with us and before I retire, so that probably wasn't going to happen!

So now we just have to figure out when it is ok to pull the trigger. I have a feeling that the answer to this is similar to having kids: if you wait until you think you are ready, you'll never have any kids! As much as I'd rather pay cash for one, I think that financing will have to be done to make it happen sooner than later. The thing that scares me to death is buying one and then having a major mechanical issue come up. As the treasurer for the flying club, I see monthly the amount of money that we shell out on maintenance, of course that is a club setting with the planes being flown a lot by a lot of different pilots.

And then we just hope and pray that work keeps going well and the income continues to increase. Other than that, stay debt free and keep our cost of living below what we earn...of course that probably goes out the window with an airplane! The good news is that we want a 205 and hopefully will be able to pick up a good one for a reasonable price that can be paid off in a couple of years.

[ZPilot]

This is an excellent thread! Although I am not an airplane owner yet, I aspire to be. I always brushed off airplane ownership as being only for the rich until I took a local float plane ride in my area in summer of 2010. This small outfit was owned and operated by a pilot that was my age. I thought: "wow, if he can do it, so can I."

So which route should I take to aircraft ownership? I am typically financially conservative. But, I must ask, where has that gotten me? I purchased a townhome in the summer of 2006. This house was a starter house, and I chose to buy something much less than what I was approved for. Around the same time I aggressively paid off my education expenses and my first car. I was laid off in 2009. I ate through my savings, as I was unable to find employment for almost two years here in Oregon. During this time, I attempted to complete my Master's degree. However, after about 9 months, I was out of money. I currently have no equity in my townhome. I lost all of my down payment, and the property has lost about 25% value. Fortunately I took in a roommate and because of this, I was able to keep the townhouse. I thought I had done all of the responsible things in life, but still found myself in a pretty bad situation.

Let's compare my situation to a co-worker of mine whom was laid off at the same time. Of course his life situations and finances were not identical, I would say that they were generally the same. During the time of his furlough, he borrowed heavily to start a flight school. Today, about 3 years later, his school is wildly successful. During his furlough he was busy in aviation and making some money.

Therefore, as I get older, I think I am realizing that being conservative in general is just about as risky as being aggressive.

Nonetheless, I digress.

I shall purchase an airplane in 2012. Do I need one? No. Do any of us here at BCP really need an airplane. No. Everyone has a hobby. This is our hobby. It is a way of life. It is a passion.
How will I do it? I will borrow. Perhaps the failure of my generation is what put us in this economic climate. We borrowed too much. However, I think that I should point out that many of those folks that took risks and borrowed were able to become successful entrepreneurs...and that, in some way, is what enabled our economy to grow at other times.

So now we just have to figure out when it is ok to pull the trigger. I have a feeling that the answer to this is similar to having kids: if you wait until you think you are ready, you'll never have any kids! As much as I'd rather pay cash for one, I think that financing will have to be done to make it happen sooner than later.

It's a great time to buy right now, unfortunately that might not change for sometime. But buying now and paying interest might be better than waiting a few years and paying a higher purchase price.

From a pure business perspective, its been a long time since planes were at the price point they are now. Couple that with extremely attractive interest rates, this is a really good time to finance an airplane. With some legwork, there is money out there at 2.5%. Something to consider, as this cycle wont last, they never do.

The above quotes seem to satisfy my justification that a purchase needs to happen sooner instead of later

My plan is to get a loan next year. I will/am looking for an airplane that easily fits my budget. I am planning on putting this airplane to work, so it can pay for itself. I won't be too demanding with this project...because I am not going to ask this airplane to pay for my life...I just want it to pay for my hobby. How will I do this? I think there are many opportunities in my area. I can sub-lease it to a flight school / instructor to do an occasional float plane rating or tail-wheel conversion course. I can do some occasional instruction in it myself. Or, some of the more adventurous ideas that I have is that I could start a little one-man, one-airplane pt135 operation out of it.

If one of these little money-making schemes turns out to be wildly successful, then great! If they just barely pay for the airplane + operational expenses, then great! If they only cover part of the expenses, that's fine too. Even if none of these operations work out, I would have a loan that I can easily afford.

I regret that I can't pay for an airplane with cash. However, life circumstances in the last few years wiped me out. Also 20 or 30 years ago, airplanes were so much cheaper, even when you consider the inflation rate. I think it is honorable that so many of you waited an saved until your retired to buy your airplane. I am not sure I am willing to wait that long.

[denalipilot]

Then there's the bugger where your next airplane turns up while you're still sitting on your last airplane. Good problem to have, I suppose...

[ZPilot]

Then there's the bugger where your next airplane turns up while you're still sitting on your last airplane. Good problem to have, I suppose...

A good problem indeed. Let's say that one of my "ideas" are successful and more than pays for my first airplane. Additionally, the demand for my first airplane is such that I have a hard time finding time in its schedule for me to fly it for fun. In this "best-case" scenario, I could justify buying a second airplane with the excess cash-flow from the first airplane. The second airplane could fit the role as my personal airplane that I would not put to work.

[DBI]

I bought my first plane when I was 25 living in Southern Nevada. When they closed down the airport for repairs I had to fly it to the local strip at the cat house to keep it flying while the airport was re-paved but that is another story...... My point is, it was an old 1962 172 and I just loved it I did finance that airplane but I only paid $11k for it in 1985. Where the hell was Dave Ramsey then!

I am currently on my 4th airplane a 1959 C-182B and have owned it for about a year. I usually pay cash for everything but in this case I did not want to drain all of my savings so I put 50% down, financed the rest and will have it paid off by March. I call it Dave Ramsey light

I have been in my industry for 34 years, getting my start in the United States Navy and am finally at the point in my career where I am doing pretty good, but it has been a long road and hard work. Like most of you, my friends think I am rich! Yet they fully don't understand that if you ad up there truck, harley and rv, etc., etc. My 52 year old 182 value does not even compare. I guess it is truely all about priorities and balance. I love my 182 and have no regrets. This has been a great thread and I find it fasinating how many people have truly found there way to financial peace from a dude with a pretty simple strategy named Dave Ramsey.....

[L-19]

Dave Ramsey..

Had to google that one.

[Skydive206]

My local farm bank refinanced the balloon payment on my U206F. Good fixed rate. Money is out there but I know of some that are having problems with financing for airplanes.

[dirtstrip]

I congratulate you.. but did you ask the banker what's up with a balloon payment on an airplane?

[Zzz]

My local farm bank refinanced the balloon payment on my U206F. Good fixed rate. Money is out there but I know of some that are having problems with financing for airplanes.

This is actually a great deal for banks, or at least the ones who are brave enough to finance aircraft. They get to essentially renew a 5 year loan on a 30 year principle, letting the borrower make tiny payments on a large balance, with the interest payments actually being larger than the principle. Borrowers generally refinance rather than pay the ballon, and the cycle begins again. It's. Like paying the monthly minimum on a credit card balance. The principle is secured by insurance, so it's great secured long term revenue as long as the borrowers don't default.

My loan of this type was at 8% back in 2005, and even with 10% down I realized shortly after that it was a great deal for the bank only. Not gonna do that again... Wouldn't trade the memories for a million bucks though.

[WingsOverPalawan]

Except for hotels, restaurants and minor stuff paid for with a secured credit card, I pay for everything with cash. No loans. No debts. If I don't have the money, then I work until I can afford it. This explains why I own a small, cheap taildragger that is sufficient for my applications, but one that happens to be very capable, cheap to operate and maintain too.

Would I consider a loan for something bigger...like a Murphy or a Bush Caddy? Yep! That's what 401K loans are for. It's a loan against your own money.

[Skydive206]

This Local Farm Bank that I am using now is not the same bank that originally financed the U206F. It was a 5 year note with balloon. Yes the bank was making good money off of me but nothing compared to the total I pay on 30 year mortgages. My Skydiving Corporation purchased the aircraft and holds the equity with the bank as lien holder. I think the bank was taking the bigger risk. They didn't know I pay my bills. To have what I have, I could not have done it without Lending. I hope the banks make money and I would not do the deal if I couldn't make money. My dad even made money off financing his Twin Otter and U206 to me.

[Zzz]

My Skydiving Corporation purchased the aircraft and holds the equity with the bank as lien holder.

How is this possible? The equity is the value of the aircraft minus the balance of the loan. If the bank holds a lien, doesn't that mean the loan is secured by ownership of the aircraft? In which case they can take possession at default?

Or do they just prevent transfer ownership by holding a lien, without holding title?

[skybobb]

I waited 20 years before I bought a 1/2 interest in a 1953 170B for $6,250. I financed that. When it was paid off I bought the other 1/2 interest. I traded that in on a fixer up 1959 182. for $26,000. in 1992. I had to come up with another $12,000. before I got it going, which took me three years. I don't play golf, fish, hunt, or have any other hobbies. I have my house in Vale paid for. The Condo my wife and I stay in in West Linn belongs to my son. It is getting harder and harder to keep flying, with fuel prices going up and my 1990 retirement dollars are getting smaller and smaller each year. $ 135.00 every year for my SI medical. More gov. rules, and new equip. requirements. I know I shouldn't have a nice 182 all by myself, because I can't afford it. On the other hand, I can't afford not to have it. It keeps me going. it makes me walk 45 min. most every day. Watch my weight. and keeps my mind sharp staying ahead of things. I am not a lot different that a lot of the rest of you, people throw that up to me that I must be rich to own an airplane. I have a 2001 ford tarus, and a 2006 ford Ranger pu. both paid for. I plan on flying as long as they will let me. Today 12/20/2011 is my birth day and I am 77 years old. I have been flying for 31 years. I might hang it up in another 13 or so.

[mountainmatt]

I waited 20 years before I bought a 1/2 interest in a 1953 170B for $6,250. I financed that. When it was paid off I bought the other 1/2 interest. I traded that in on a fixer up 1959 182. for $26,000. in 1992. I had to come up with another $12,000. before I got it going, which took me three years. I don't play golf, fish, hunt, or have any other hobbies. I have my house in Vale paid for. The Condo my wife and I stay in in West Linn belongs to my son. It is getting harder and harder to keep flying, with fuel prices going up and my 1990 retirement dollars are getting smaller and smaller each year. $ 135.00 every year for my SI medical. More gov. rules, and new equip. requirements. I know I shouldn't have a nice 182 all by myself, because I can't afford it. On the other hand, I can't afford not to have it. It keeps me going. it makes me walk 45 min. most every day. Watch my weight. and keeps my mind sharp staying ahead of things. I am not a lot different that a lot of the rest of you, people throw that up to me that I must be rich to own an airplane. I have a 2001 ford tarus, and a 2006 ford Ranger pu. both paid for. I plan on flying as long as they will let me. Today 12/20/2011 is my birth day and I am 77 years old. I have been flying for 31 years. I might hang it up in another 13 or so.

Good for you Bob. Happy Birthday and I wish you many great years behind the yoke.

[denalipilot]

I waited 20 years before I bought a 1/2 interest in a 1953 170B for $6,250. I financed that. When it was paid off I bought the other 1/2 interest. I traded that in on a fixer up 1959 182. for $26,000. in 1992. I had to come up with another $12,000. before I got it going, which took me three years. I don't play golf, fish, hunt, or have any other hobbies. I have my house in Vale paid for. The Condo my wife and I stay in in West Linn belongs to my son. It is getting harder and harder to keep flying, with fuel prices going up and my 1990 retirement dollars are getting smaller and smaller each year. $ 135.00 every year for my SI medical. More gov. rules, and new equip. requirements. I know I shouldn't have a nice 182 all by myself, because I can't afford it. On the other hand, I can't afford not to have it. It keeps me going. it makes me walk 45 min. most every day. Watch my weight. and keeps my mind sharp staying ahead of things. I am not a lot different that a lot of the rest of you, people throw that up to me that I must be rich to own an airplane. I have a 2001 ford tarus, and a 2006 ford Ranger pu. both paid for. I plan on flying as long as they will let me. Today 12/20/2011 is my birth day and I am 77 years old. I have been flying for 31 years. I might hang it up in another 13 or so.

Good for you Bob. Happy Birthday and I wish you many great years behind the yoke.

What Matt said

[dirtstrip]

Happy B Bob! The part I like of your flying story is what you get back, reason to get up, stay active and do your thing for as long as you can. U B R HERO!