Aircraft financing - how does it work?
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Aircraft financing - how does it work?
Hi.
This is mainly a question for you who own your own aircraft and have it financed.
I'm reading up and trying to inform myself about aircraft ownership. I'm toying with the idea to some time in the future buy my own plane as the type of flying I want to do isn't really conducive to rental (fly camping, traveling). I've always had a thing for Lake Buccaneers/Renegades and have dreamt about one day having one of those of my own, but they'd have to be financed. A smaller C150 or something I could buy outright which would probably be the most sensible. But why not go for what you really want?
So I have a couple of questions.
How does aircraft financing work? Is it pretty much like car financing? What are the normal deposit percentages and rates you pay?
In this field, are there any recommended players and providers for the UK market and are there ones you've had bad experiences with?
Thanks.
This is mainly a question for you who own your own aircraft and have it financed.
I'm reading up and trying to inform myself about aircraft ownership. I'm toying with the idea to some time in the future buy my own plane as the type of flying I want to do isn't really conducive to rental (fly camping, traveling). I've always had a thing for Lake Buccaneers/Renegades and have dreamt about one day having one of those of my own, but they'd have to be financed. A smaller C150 or something I could buy outright which would probably be the most sensible. But why not go for what you really want?
So I have a couple of questions.
How does aircraft financing work? Is it pretty much like car financing? What are the normal deposit percentages and rates you pay?
In this field, are there any recommended players and providers for the UK market and are there ones you've had bad experiences with?
Thanks.
Last edited by AdamFrisch; 19th Dec 2009 at 10:13.
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There are very few private owner pilots who bought their plane with a loan.
It is rather more common in the USA, from what I hear.
IMHO it is foolish to borrow money for something depreciating fairly fast, but others will differ
It is rather more common in the USA, from what I hear.
IMHO it is foolish to borrow money for something depreciating fairly fast, but others will differ
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My opinion is that if you have to borrow money to buy the plane, don't buy it, because you can't afford to maintain and operate it after you get it. Buy what you can afford - no more.
Lake amphibs are great aircraft for what they were designed for. They are a delight to fly, and handle very well and safely - if flown properly. Training on type (not floatplane training - must be on flying boat, 10 to 25 hours) is vital - you just will not get insurance on a Lake at any price without it! (and you won't get financing without insurance!) If you fly the aircraft without training, your first landing on water will probably be your last. When flown as intended, they are very forgiving, and amazing on the water, but the floatplane landing technique is not the flying boat technique!
As any aircraft does, Lakes do have their limitations, and special maintenance requirements, which you must be aware of. They do a different job than float planes. They are better in some regards, and less sutiable in others. Make arrangements to do a few hours of flying in one before you make your decision. If you seriously need to make it happen, PM me.
As for financing aircraft purchases, I have no idea - I bought my C150 for cash 23 years ago...
Pilot DAR
Lake amphibs are great aircraft for what they were designed for. They are a delight to fly, and handle very well and safely - if flown properly. Training on type (not floatplane training - must be on flying boat, 10 to 25 hours) is vital - you just will not get insurance on a Lake at any price without it! (and you won't get financing without insurance!) If you fly the aircraft without training, your first landing on water will probably be your last. When flown as intended, they are very forgiving, and amazing on the water, but the floatplane landing technique is not the flying boat technique!
As any aircraft does, Lakes do have their limitations, and special maintenance requirements, which you must be aware of. They do a different job than float planes. They are better in some regards, and less sutiable in others. Make arrangements to do a few hours of flying in one before you make your decision. If you seriously need to make it happen, PM me.
As for financing aircraft purchases, I have no idea - I bought my C150 for cash 23 years ago...
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But they don't seem to depreciate that much. Most Cessnas and Pipers have a higher price today than they had new, if kept after.
That is true for perhaps any plane IF it was bought long enough ago - say 30+ years ago.
Of course the reason for this is that vastly more money (than its value) was spent on maintenance in the meantime, which nobody would do with a car unless it is a rare vintage type.
It also used to be true that new price inflation would protect your depreciation. This I think was the case for many years. I have not been flying that long but for example I bought a new plane in 2002. In 2003 the same plane was listed at 10% more (I checked for hull insurance purposes).
In those days everybody thought this would continue, because it had (at the time) continued for many years.
But c. 2005 the bottom fell out of the market.
Now, 7 years later, my plane would sell for about 70% of what I paid for it and believe me this is a damn good price relative to most others. Only a few other choice items (no longer made, like mine) would fetch that. Most others are down to maybe 50%, and the "popular plastic" ones (e.g. Cirruses) have suffered massively with some being worth maybe 20%. (There was a long thread here on the Cirrus recently).
But if you took out a loan, you will be repaying the full amount
And then if/when you sell, you will have a huge shortfall to fund.
My opinion is that if you have to borrow money to buy the plane, don't buy it, because you can't afford to maintain and operate it after you get it. Buy what you can afford - no more.
because the same argument would be (correctly IMHO) applied to so much else in GA not to mention the rest of one's life, and most people don't like to be told they "can't" do something.For example if one cannot afford to get one's PPL (in the UK, at UK prices) one will not be doing much (or any) flying afterwards, because the ongoing cost of flying will over many years come to many times the PPL cost.
Anyway, re the purchase price, also allow a margin for mishaps and maintenance suprises. Insurance should cover mishaps but you need to be able to fund stuff like engine rebuilds. I guess that at the C150 ownership level you need to always be able to write a cheque for £10k or so.
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I borrowed some of the cost of an aircraft for my company a few years ago.
My bank offered an overdraft. Too expensive. Although I dealt with finance companies on a daily basis I could not get any of the big names to lend for an aircraft. One said they had been left with five Boeing 737s some time ago and did not now get involved with aviation. I eventually used Air and General finance, now Close Brothers. They insisted on a mortgage although the loan was only 5 years.
I think the cheapest way now for a private buyer would be to take out a personal loan and say it was for a house extention.
DO.
My bank offered an overdraft. Too expensive. Although I dealt with finance companies on a daily basis I could not get any of the big names to lend for an aircraft. One said they had been left with five Boeing 737s some time ago and did not now get involved with aviation. I eventually used Air and General finance, now Close Brothers. They insisted on a mortgage although the loan was only 5 years.
I think the cheapest way now for a private buyer would be to take out a personal loan and say it was for a house extention.
DO.
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I am a member of a flying club and that's precisely why I think I'd rather own!
Don't get me wrong - the flying club is great and has good people, but yesterday I was up for one hour exactly, did one landing, C152. £138. That adds up pretty quick if you want to do more than 10hrs/year. At some point not that far off, it will add up enough to be more costly than owning. Don't know exactly where the break is, but I'm assuming around 30-40hrs.
There's also other considerations with flying club aircraft and that is the practical aspects. Friday I was supposed to go up to London for a job, got snowed in like everybody else and sat in the car for 5hrs like a muppet. Lost the job (they had to get someone else in), yet the skies were clear and I could have made it to my airport and flown up to Southend in time. But I'd have to leave the plane there overnight and fly back the day after as my work takes me into the nights. Or if the weather had been bad, it might have had to sit for more days. This is impossible to do with flying club aircraft as they're always booked out on training flights the day after or something.
And this summer I really want to fly home to Sweden to visit. That's a good 8hr flight in a C152 at a flying club cost of £1104 - one way!
These are my reasons for considering ownership. I hear you about not financing toys, and I agree, but at the same time it doesn't have to be bad business. One could make the same argument about not getting a mortgage buying a house, but few of us would have a house then.
Don't get me wrong - the flying club is great and has good people, but yesterday I was up for one hour exactly, did one landing, C152. £138. That adds up pretty quick if you want to do more than 10hrs/year. At some point not that far off, it will add up enough to be more costly than owning. Don't know exactly where the break is, but I'm assuming around 30-40hrs.
There's also other considerations with flying club aircraft and that is the practical aspects. Friday I was supposed to go up to London for a job, got snowed in like everybody else and sat in the car for 5hrs like a muppet. Lost the job (they had to get someone else in), yet the skies were clear and I could have made it to my airport and flown up to Southend in time. But I'd have to leave the plane there overnight and fly back the day after as my work takes me into the nights. Or if the weather had been bad, it might have had to sit for more days. This is impossible to do with flying club aircraft as they're always booked out on training flights the day after or something.
And this summer I really want to fly home to Sweden to visit. That's a good 8hr flight in a C152 at a flying club cost of £1104 - one way!
These are my reasons for considering ownership. I hear you about not financing toys, and I agree, but at the same time it doesn't have to be bad business. One could make the same argument about not getting a mortgage buying a house, but few of us would have a house then.
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Indeed Adam - this has been done to death here many times and there are huge advantages to ownership, which one cannot put a value on, like total access, maintenance to YOUR standards, knowing nobody else has been messing with it, the lowest possible hourly (marginal) cost, etc.
You just need to find the money - but with a margin on top as I mentioned earlier.
If you can't, assembling a group of like-minded and trustworthy (and financially- and attitude- and mission-profile-compatible) people is the next best way. Not easy; I tried it and failed miserably. But lower downmarket it should be easier than what I was doing.
But be prepared for a steep learning curve on stuff like maintenance, who to trust (not many you can trust in GA), airfield politics, etc. It's all worth it in the end, and I would never go back, but it is not for the faint hearted who think they can treat a plane like a cheap boat in some marina
You just need to find the money - but with a margin on top as I mentioned earlier.
If you can't, assembling a group of like-minded and trustworthy (and financially- and attitude- and mission-profile-compatible) people is the next best way. Not easy; I tried it and failed miserably. But lower downmarket it should be easier than what I was doing.
But be prepared for a steep learning curve on stuff like maintenance, who to trust (not many you can trust in GA), airfield politics, etc. It's all worth it in the end, and I would never go back, but it is not for the faint hearted who think they can treat a plane like a cheap boat in some marina
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My opinion is that if you have to borrow money to buy the plane, don't buy it, because you can't afford to maintain and operate it after you get it
Only a while ago, there was someone on here looking to scrap a PA28-140 because the cost of maintenance exceeded the value of the hull.
Our club also found ourselves in a similar position with an aircraft recently.
Maintenance is the real cost of ownership of an old aircraft....not the purchase price of the hull.
If you really want to buy something with lower maintenance bills, where the hull represents the cost of ownership, then you need to buy something newer. If that is to fit your budget, then it may need to be a microlight of some sort, or one of the new VLA's.
There are many good reasons for buying your own aircraft, but I don't think cost saving is one. Often ownership is a more expensive way of flying.
If you want to save costs, try group ownership.
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You will probably have died of some disease a long time ago though!!
Because if you can rent it and f
k around with it, everybody else can do the same
The exception is if you can find the fairly unusual setup where you can rent something of good quality. It is damn difficult to make a business model around something decent (because the depreciation will eat away the profit) but these setups do exist around the place. They can either be flying schools (generally those operating the DA40s) or other business type ops looking to defray their operating costs and willing to take a loss while doing so.
Because if you can rent it and f
k around with it, everybody else can do the same The exception is if you can find the fairly unusual setup where you can rent something of good quality. It is damn difficult to make a business model around something decent (because the depreciation will eat away the profit) but these setups do exist around the place. They can either be flying schools (generally those operating the DA40s) or other business type ops looking to defray their operating costs and willing to take a loss while doing so.
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got snowed in like everybody else and sat in the car for 5hrs like a muppet. Lost the job (they had to get someone else in), yet the skies were clear and I could have made it to my airport and flown up to Southend in time.
I'm not an expert at snow in the UK, but I am pretty experienced at flying in Canadian snow, and when not to attempt to fly in it. An occasionally rather scary learning curve, I assure you! The snow is coming from somewhere, maybe clear skis where you're looking, but there's poor weather somewhere close by...
A light aircraft is not a means to travel, when weather is the least concern for any other mode of transport. I have used my plane to commute to jobs for 23 years, and my car for much longer. But, if I really have to be there on time, I buy a ticket on a commercial flight, and leave the plane at home.
Though light aicraft can be a business tool, they certainly are no more dependable than a car as one. It's tough to sit stuck in traffic, looking up, but remember the well used avaition saying: "It's better to be down here wishing you were up there, than up there wishing you were down here!". Wishing the former is fun, wishing the latter is very scary!
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It was just an example of when it had been useful. I realize that relying on it for commuting would be insane.
In the end, nothing about private flying can be justified in costs - it's just a a loss/loss game financially speaking. There's no rationalization. But other people might waste the same amount at the pub or buying fancy cars - at least I don't have that problem.
In the end, nothing about private flying can be justified in costs - it's just a a loss/loss game financially speaking. There's no rationalization. But other people might waste the same amount at the pub or buying fancy cars - at least I don't have that problem.
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I would say buying into a group of up 6 is the bes way to go even if someone else has it booked chances are you really need it and not just for a bimble they would give up there slot ?
I'm in a group 172 done 42ish hours this year and in total it has cost me £70 p/h
and we have a healthy fund
Cheers
Jxc
I'm in a group 172 done 42ish hours this year and in total it has cost me £70 p/h
and we have a healthy fund
Cheers
Jxc
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I just noticed you are in Hastings may be moving down that neck of the woods mid next year so will be needing a new group though not many places near you except Lydd possibly a farmstrip but if like ours deep in snow and ice
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You can commute in a plane.
It all depends on what you mean by "commuting", or "flying on business".
This stuff ranges from trips which are absolutely critical (doing a formal customer visit; you have to be there so a GA flight cannot be done unless the weather is assured) all the way through a broad spectrum, to trips which are really quite discretionary because the people you are seeing, or the conference/presentation/exhibition you are going to is not exactly life-critical. Customer visits are tricky anyway because generally you do not want the customer to discover you have a plane (obviously).
I think it is safe to say that if you want to do formal customer visits, or commuting to a 9-5 day job where you don't own the company, i.e. a 99%+ despatch rate, you need a de-iced plane, oxygen, an IR, the lot. Or balls made of solid brass but that is not a good long term weather strategy
Below that level, you can do quite a lot, but an instrument capability is still necessary. A purely VFR pilot who cannot go into IMC will be scrapping at least half his flights (if he has to go every day, all year).
I have met people who more or less commuted to some place of work but in all cases I know of they are in a pretty flexible situation where they can work from home if they can't fly, etc.
If you can go the day before or after, in the UK frontal weather pattern this dramatically improves the despatch rate. One person I flew with commuted from UK to Holland, flying home for the weekend - for years. If he couldn't depart for the UK on Friday evening he would go Saturday morning, etc. He had an IR.
I have done a lot of long trips across Europe and generally avoid flying through fronts (operating ceiling 20,000ft but no overall de-ice, or radar, so go for VMC on top enroute) but nearly always manage to get away on the planned date plus or minus 1 day.
Subject to the above, a light plane, IFR, works well for anywhere in France, or near Europe, and beats any other means of travel hands down. Forget the stupid naive rigged Top Gear car/plane comparison stunts. It even works within the UK, on certain routes like the SE to N Wales for example.
It all depends on what you mean by "commuting", or "flying on business".
This stuff ranges from trips which are absolutely critical (doing a formal customer visit; you have to be there so a GA flight cannot be done unless the weather is assured) all the way through a broad spectrum, to trips which are really quite discretionary because the people you are seeing, or the conference/presentation/exhibition you are going to is not exactly life-critical. Customer visits are tricky anyway because generally you do not want the customer to discover you have a plane (obviously).
I think it is safe to say that if you want to do formal customer visits, or commuting to a 9-5 day job where you don't own the company, i.e. a 99%+ despatch rate, you need a de-iced plane, oxygen, an IR, the lot. Or balls made of solid brass but that is not a good long term weather strategy
Below that level, you can do quite a lot, but an instrument capability is still necessary. A purely VFR pilot who cannot go into IMC will be scrapping at least half his flights (if he has to go every day, all year).
I have met people who more or less commuted to some place of work but in all cases I know of they are in a pretty flexible situation where they can work from home if they can't fly, etc.
If you can go the day before or after, in the UK frontal weather pattern this dramatically improves the despatch rate. One person I flew with commuted from UK to Holland, flying home for the weekend - for years. If he couldn't depart for the UK on Friday evening he would go Saturday morning, etc. He had an IR.
I have done a lot of long trips across Europe and generally avoid flying through fronts (operating ceiling 20,000ft but no overall de-ice, or radar, so go for VMC on top enroute) but nearly always manage to get away on the planned date plus or minus 1 day.
Subject to the above, a light plane, IFR, works well for anywhere in France, or near Europe, and beats any other means of travel hands down. Forget the stupid naive rigged Top Gear car/plane comparison stunts. It even works within the UK, on certain routes like the SE to N Wales for example.
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Lydd is a good airfield. Cheap to fly from and with friendly and good ATC. Only problem is it's in the middle of nowhere. Even though it's just a stone throw with a polio arm on the map, the useless A259 from Hastings to Rye takes 45min. And if you get stuck behind a tractor or lorry, you're had.
There is a small grass strip at Spilsted Farm, but I have not had any response from the owner about landing there. Maybe they're not so keen. I'll drive by one day.
There are loads of groups at Lydd, so if you want to join a group there won't be a problem. At the moment there are at least 3 shares in PA28's available, one in a TB200, Cheetah (I think) and one in a new-ish Saratoga.
IO540 - thanks for keeping the dream alive
Yeah, for serious commuting an IR and a capable plane would have to be a must. I can normally tailor so that I can be there a day ahead, but on the day if I don't turn up, it's a disaster. People depend on me being there. So that will have to happen in the future sometime, if ever (I'm hoping that by the time I get around to an IR, they've changed the rules and made it less a**l).
There is a small grass strip at Spilsted Farm, but I have not had any response from the owner about landing there. Maybe they're not so keen. I'll drive by one day.
There are loads of groups at Lydd, so if you want to join a group there won't be a problem. At the moment there are at least 3 shares in PA28's available, one in a TB200, Cheetah (I think) and one in a new-ish Saratoga.
IO540 - thanks for keeping the dream alive
Yeah, for serious commuting an IR and a capable plane would have to be a must. I can normally tailor so that I can be there a day ahead, but on the day if I don't turn up, it's a disaster. People depend on me being there. So that will have to happen in the future sometime, if ever (I'm hoping that by the time I get around to an IR, they've changed the rules and made it less a**l).
Last edited by AdamFrisch; 20th Dec 2009 at 19:07.
