Buying an aircraft and mortgages

[flywithmartin]

Hi All

I am considering:

1. Buying a 2nd hand aircraft; or
2. Buying a new aircraft

Does anyone have any advice or guidance when it comes to considering this? Any useful websites which you can point me in the direction of?

I would also be keen to speak to people who have got aircraft mortgages to find out exactly how that works as well.

Thanks for your help.

[sharpend]

Depends what you want. If you want a Bulldog or Chippy for example, you have to buy used. Then the problems start.
If you want new, you are almost limited to microlights, ultralights etc (unless you are very rich). All those have many restrictions as to what you can to do with the aeroplane.
So that is the rub; what do you want to use it for; a bimble, aeros, touring?
Buying new also has problems. You may be subjected to moveable exchange rates, money up front, collection from Italy etc (not too easy in winter).
It's a very complex subject!

[skydiver548]

If you are looking for finance / mortgage there are a couple of companies that will deal with GA, i.e. Close Bros Aviation.

These companies have a minimum lend of somewhere near £60,000 and require a deposit of around 25%... so you aircraft new or used would need to £80,000 and up.

The other way to do it is remortgage your house and pull some equity out of it, which isn't the easiest thing to do and more (or the most sensible !!)

Hope that helps

[Pirke]

New aircraft have a much higher deprecation, even though factories try to tell you they don't deprecate, they do... they loose half their value in 5 - 10 years, depending on type and hours flown. Taking a loan for something that looses 10k per year in value (minimum) might not be the best move if you can't afford to pay back the loan+interest with at least the deprecation amount.

Deprecation is of no concern if you plan to keep it for 40 years, as by then the inflation caused the aircraft to gain in value again. But that only holds for the long term. If you buy a cheap used aircraft, that one will also gain in value due to inflation on the long term, assuming the airframe survives all these years.

[maxred]

Looking for funding on aircraft has become more difficult, since the financial disaster. Some companies have introduced minimum lend, which means your deposit required gets larger. Some companies will only lend new. You then take a huge hit on depreciation. Most have pulled out of the market. So, where does it leave you.

1. Save up and purchase with cash.
2. A personal loan from a bank.
3. Group, where a few of you get together, pull resource, and purchase.
4. Find a willing seller, agree a price, and pay it up over 12-18 months, with interest. He will sell you shares in the asset, you become managing owner, and after final payment you own it. You will be responsible for all costs.
5. I would always buy used....

Hope that helps

[Gertrude the Wombat]

The other way to do it is remortgage your house and pull some equity out of it, which isn't the easiest thing to do
Unless you've got a current account mortgage, in which case you just write a cheque.

[Sam Rutherford]

My tuppence, buy used, buy cash (no debt), keep a lot spare to keep the thing in the air...


Start small and 'cheap' - after a couple of years you'll know if you want/can go bigger/faster...


Safe flights, Sam.

[Monocock]

There are several lenders who'll lend for GA buyers. Mostly, they're classic car lenders who have a bit of GA knowledge. I can dig out some emails if you want as I looked into doing this as a sideline last autumn. I decided not to as I couldn't see what would be in it for me as a 'lead'.

I've always worked on the basis of buying outright if it's for pleasure and paying for finance if it's a business (tax efficiency and balance sheet etc etc).

So, if you want a £30k Bulldog, you can have one, but you'll need a 25% deposit.

[Baikonour]

The cheapest way unless you have the cash will more than likely be to release some equity in your home - or one of your homes if you have several - and get the cash.

But I would agree with Mono; if you are taking out any sort of finance to buy a plane, you should look on it as a business and set up a proper business plan and aim for some profit. If the profit isn't there, you may want to rethink doing it...

If it flies, f#¤&s or floats...

B.

[GAAV8R]

I, too, was looking at starting a GA finance business on the side. There are a few issues that make it more difficult - not least where about 10 years ago, an aircraft was thought to hold its value well, but now they are seen as depreciating assets (just look at twins). Permit and plastic aircraft tend to do better, but it can take an eternity to shift some and not many underwriters want aircraft on their books instead of cash - which is why the minimum lend and deposits have increased.

Agree with Sam, Mono and Baikonour: better to use cash (business usage excepted).. And Sam is right - used will be better and keep cash to keep it in the air. I know someone who purchased a new model of what I have a share of and surprisingly, his operating costs were not much different to ours. Factor in the depreciation and he is shelling out a shedload for the same aircraft, same reliability, same performance, same comfort. It was shinier, the seats smelt new and he had better avionics (not by much, though).

I have been thinking of offering an operating lease type arrangement (lessee only has to add fuel and possibly insurance) on second hand planes, but it is very risky..

[Ampage]

Why won't people in this position consider a small syndicate?

You're probably not flying enough to warrant your own aircraft.

I may have a slightly different requirement to yourself, but I have recently joined an Extra 300 syndicate, with one businessman who looks after the books (very well I might add) and another Ex airline captain, with 15,000Hrs across 50 types and heaps of instructor experience. I have the best of both worlds and hardly have to fret about any of the following issues:

Unforseen maintenance costs (our monthly cost includes a sinking fund to cover any insurance excess or big breakages)
Paperwork that needs doing - we all keep up on this
Hangarage - (again it comes out of my monthly payment)
Expected maintenance - annuals, 50hrs etc. - (yet again it comes out of my monthly payment)
Insurance - (Guess what? - Montly payment covers this)
My own currency on type (It is a high performance tailwheel aircraft and you need to be on your toes. Very available instructor)

I can't imagine doing this on my own, and I certainly couldn't afford it on my own.

[AdamFrisch]

It used to be the case that you could borrow against engine times etc. And that a new engine would increase value. That's no longer the case, and especially twins and less desirable singles have a very nebulous value picture, making it hard to finance. It's unfortunate, but that's how it's going to be in the future.

Not everyone wants a syndicate. Even if it costs me more, I want to own my plane alone. Part of the desire of flying is to have full freedom. That freedom is gone when you have to share it with someone who might need it the same time as you.