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Hey gang!  Still looking into buying the C from the Colonel.  Because it’s a C, the price is very reasonable. I have planned to not finance the purchase but right now I am looking into financing a portion of the plane to hold onto some cash for the unknown items that will pop up.   I am a finance guy so I do understand most of the pros and cons of getting a loan on the plane.  

My question is this -  are there certain companies that will finance planes built in 1962? My initial search found large companies that won’t finance older than 1970.  

Also - I know it depends on a few factors, but what are going interest rates for aviation loans?  As with most plane buyers I am sure, I am a strong buyer. But I wonder what rates and terms look like on these loans? 

Any feedback would be greatly appreciated. If you have the name of a lender that will do 62 models I would love to hear them!

-JA 

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For the right rate I'll lend you the funds.

Hate to say this and poo on your thread. For *strictly personal usage*, If one cant pay cash for the plane, they probably shouldn't be owning.

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Jake,

If you are an AOPA member work through them and they will shop for rate based on the plane and your particulars.  They sometimes have some pull with the finance companies because they can bundle the loans.  Pilot Bank will finance a 1962.  Depending on the amount financed will affect the rate, term and down payment.  Usually under $30,000 means max term of 10 years and 20% down, rate around 7.5%.  $30,000 to $50,000 term can be 15 years 15% down and rate around 6.5%.  I would also offer to save initial interest you may want to proceed with buying it outright and then down the road if you need financing to assist with big ticket items such as engine overhaul, you contact them and finance that.  They usually will allow you to finance up to 85% of the value of the plane for engine and avionics, and those improvements increase the value.  In essence you are using the equity in the plane to improve the plane.

Bottom-line to answer your questions, you need to get on the phone and e-mail and make some contacts, or work through AOPA Finance or broker to do it for you.

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1 hour ago, NJMac said:

Hate to say this and poo on your thread. For *strictly personal usage*, If one cant pay cash for the plane, they probably shouldn't be owning.

I tend to agree with the sentiment... although there is no indication here that the OP "can't pay cash". There are many good reasons to borrow the money for example borrowing at a lower interest rate to keep the cash in a higher performing investment.

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I tend to agree with the sentiment... although there is no indication here that the OP "can't pay cash". There are many good reasons to borrow the money for example borrowing at a lower interest rate to keep the cash in a higher performing investment.
I'm not smart enough to find those better performing investments.

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I think the best reason to pay cash for an airplane, is so that on the occasion when the wife looks at the monthly bills... there's no mention of an airplane. default_blink.png

Love to say "it's free if it's in inventory" around our warehouses. Same goes foe the plane. Totally free.

 

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I used AOPA to arrange financing...

After a decade of experience in owning an M20C...

I was committed to owning a better plane, and willing to finance to get it...

 

my local bank was only able to finance million dollar jets... Nice, but not very helpful for my budget....

AOPA always has a banking relationship that can make this work.

The cost is going to be high... a few percent more compared to a home loan...

Government rules protect home buyers really well compared to plane buyers... 

 

Even Bigger picture... read the documents carefully... make sure there is no penalty for paying the loan off early...

If you decide to pay off the plane loan to get a larger home loan... home loans are currently around 4% fixed rate and 30years... this may make sense as your experience grows... go to bankrate.com for actual  rates... in your neighborhood.

 

Taking the fun out of airplane buying is looking at opportunity lost costs...

And finding that investment isn’t all that hard...

It is pretty easy to prove to yourself... investing in the entire S&P 500, has returned, on average, the rate of about 10% per year since 1928... even better since the end of WWII... (CNBC has presentations on this)

how does this help?  Look up the rule of 72...  divide 72 by the interest rate you are earning... 72/10... this calculates how long it will take to double your money...  (high school level finance class)... 7.2 years...

 

This is fun stuff I learned by reading MS... then went to internet to see how true it may be...

For some really quirky financial advice... look how well Forrest Gump’s advice to own a fruit company has worked since that movie was released...  find yahoo finance, do the math using AAPL.

The best advice here... don’t have the monthly reminder each time the plane bill is due... a small scale experiment....  that financed cell phone that is still being paid down, months after it got broken... very annoying for the finance administrator... :)

PP thoughts only, not a financial person at all... just ideas worth looking into... for the big picture.

Best regards,

-a-

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1 hour ago, NJMac said:

Start a business, make a bunch of loans to shareholders, then have the business go bankrupt and keep the cash. Simple!

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You did it wrong.   The loans go to executives and board members.   That's the usual practice, anyway.

A publicly-traded company I once worked for did that after a management change. 

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You did it wrong.   The loans go to executives and board members.    


Yep. Exactly what I was proposing!

I can share a story offline of our prior accounting firm who did that to my company without me even knowing For a few years.

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Thanks for the replies guys! I am into some real estate stuff on the side and like to have extra cash to play with for those projects.  Don’t need to finance the plane but considering that option so that I have other opportunities with the funds.  I will reach out to AOPA as well as the various institutions listed on your comments.  Much appreciated! 

JA 

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23 hours ago, Boilermonkey said:

Far easier and cheaper to pull equity out of your house...

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As a residential mortgage lender I do see your logic and like the idea. 

21 hours ago, gsxrpilot said:

I tend to agree with the sentiment... although there is no indication here that the OP "can't pay cash". There are many good reasons to borrow the money for example borrowing at a lower interest rate to keep the cash in a higher performing investment.

This. 

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On 5/30/2019 at 11:32 AM, NJMac said:

For the right rate I'll lend you the funds. emoji16.png

Hate to say this and poo on your thread. For *strictly personal usage*, If one cant pay cash for the plane, they probably shouldn't be owning.

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I’ll see your “hate to say this” and raise you the notion that being able to pay cash for the asset (a good thing) does not make it the correct course of action. There are smart reasons to use debt to purchase an airplane. There are smart reasons to use cash. He stated that he’s a finance guy looking for a finance company and you've given him a Dave Ramsey lecture. :lol:

Edited by Shadrach
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4 hours ago, jakearey said:

Thanks for the replies guys! I am into some real estate stuff on the side and like to have extra cash to play with for those projects.  Don’t need to finance the plane but considering that option so that I have other opportunities with the funds.  I will reach out to AOPA as well as the various institutions listed on your comments.  Much appreciated! 

JA 

This does make sense.  If your money can make more for you than the interest on the loan, then financing makes really good sense.  The equity backed loans are nice, as it lowers the effective interest rate and makes it more facile to make more off your money.  Dabbling in real estate one would think you could tie the loan to a property, though I imagine that makes said property more illiquid than would be desirable.

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I also used Pilot Bank (EAA partner) and have been quite satisfied. Terms were as described in prior post: 15 yr, 20% down on a '68 M20F. Could have made the cash appear to buy outright, but wouldnt have been able to make the wife reappear if I dropped that much cash on my toy.

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