What’s the Best Way to Fund an Aircraft Purchase in Today’s Market?

[AlwaysLearning]

Thank you for this conversation.

I am struggling to figure out a way to find / afford my first aircraft as well. Key here is I am younger, married, with no kids. I have been looking at Mooney's and liking what I see. Working on my PPL my chosen flight school removed the 152's from there fleet. Now I am renting 172's at $160ish an hour in addition to  $70 for instructor. This is actually making it right on that line for me to buy vs rent. Trying to fly 6hrs a week or more and that's a plane payment, insurance, and hanger.... and a little more. 

Your awesome 

[Ragsf15e]

3 minutes ago, AlwaysLearning said:

Thank you for this conversation.

I am struggling to figure out a way to find / afford my first aircraft as well. Key here is I am younger, married, with no kids. I have been looking at Mooney's and liking what I see. Working on my PPL my chosen flight school removed the 152's from there fleet. Now I am renting 172's at $160ish an hour in addition to  $70 for instructor. This is actually making it right on that line for me to buy vs rent. Trying to fly 6hrs a week or more and that's a plane payment, insurance, and hanger.... and a little more. 

Your awesome 

Just realize that the cost of buying isn’t the actual price.  Yearly costs on everything else quickly catch up.  Those are the ones that sneak up on you.  Get a good read on those vs your budget.  The initial price is easier to comprehend.

[LANCECASPER]

2 minutes ago, AlwaysLearning said:

Thank you for this conversation.

I am struggling to figure out a way to find / afford my first aircraft as well. Key here is I am younger, married, with no kids. I have been looking at Mooney's and liking what I see. Working on my PPL my chosen flight school removed the 152's from there fleet. Now I am renting 172's at $160ish an hour in addition to  $70 for instructor. This is actually making it right on that line for me to buy vs rent. Trying to fly 6hrs a week or more and that's a plane payment, insurance, and hanger.... and a little more. 

Your awesome 

Of course the obvious difference is that if a glitch happens with your career, economy, health, etc. etc, you can easily stop renting. Once you finance an airplane the payment still comes due every month, along with all of the other fixed expenses. 

[jaylw314]

13 minutes ago, AlwaysLearning said:

Thank you for this conversation.

I am struggling to figure out a way to find / afford my first aircraft as well. Key here is I am younger, married, with no kids. I have been looking at Mooney's and liking what I see. Working on my PPL my chosen flight school removed the 152's from there fleet. Now I am renting 172's at $160ish an hour in addition to  $70 for instructor. This is actually making it right on that line for me to buy vs rent. Trying to fly 6hrs a week or more and that's a plane payment, insurance, and hanger.... and a little more. 

Your awesome 

Assuming flying isn't your job, remember that after your training your flying will regress back to something like 50-100 hours a year.  Sure, the cost-effectiveness of ownership improves during training when you're committed to flying heavily, but life won't allow you to keep up that level of commitment continuously.  I don't think I fly enough at about 60 hours a year, but my mechanic says that's more than the majority of recreational owners he deals with.

I'd suggest renting for your PPL -- you probably won't have an idea of what your mission will end up looking like and what you need until you've gotten some time under your belt, and the cost of renting will not likely be worse than the costs of ownership anyway.  After that, a flying club is a good way to test out a couple different types of planes to get a feel of what you like

I'd definitely suggest buying a plane if you do IFR, though.

Edited December 10, 2022 by jaylw314

[EricJ]

14 minutes ago, Ragsf15e said:

Just realize that the cost of buying isn’t the actual price.  Yearly costs on everything else quickly catch up.  Those are the ones that sneak up on you.  Get a good read on those vs your budget.  The initial price is easier to comprehend.

Yes, assessing the "cost of ownership" is far more important than the purchase price.    With race cars and airplanes it's pretty easy to observe that relatively inexpensive purchase prices are often because people know the cost of ownership is quite high.   Some things are easy to purchase, but very expensive to use.    The magic of the Mooney is hitting a very nice sweet spot of reasonable on purchase price as well as cost of ownership.

[AlwaysLearning]

At this point my wife is in her carrier as am I. I am looking at ATP due to wanting to change careers and the love of aviation. So yes I am going to go for my IFR as well. I have always disliked renting most expensive things I am planning on using long term preferring to invest in things for me / us. Cars house etc.

[A64Pilot]

2 hours ago, Fly Boomer said:

I would include monster houses in your list.  The slide has begun.

The Mcmansion’s are hard to sell even in the best of times, I’ve wondered why and guess when your talking Millions people don’t want used and they want their own design I guess.

Houses have become more desirable I think as a status symbol, people often buy the most expensive house that they can qualify for loan wise.

‘I’ve never been a house guy, my Wife however is to some extent, in honest truth anything over say 1200 square ft is to me a waste, but that’s a very specific floor plan, I have no use for guest rooms and extra bathrooms, an office or living or dining rooms.

‘But I like having 3,000 sq ft of climate controlled hangar  

[MikeOH]

1 hour ago, AlwaysLearning said:

At this point my wife is in her carrier as am I. I am looking at ATP due to wanting to change careers and the love of aviation. So yes I am going to go for my IFR as well. I have always disliked renting most expensive things I am planning on using long term preferring to invest in things for me / us. Cars house etc.

My few cents:

1) Using the term 'invest' in the same sentence as airplane is not wise

2) My M20F has cost, all in, between $14,000 and $18,000 per year over the last 5 years.  It doesn't really vary that much with my hours of 70 to 100 per year.  It's variable maintenance that accounts for most of the difference year to year.

3) You WILL spend way more on insurance for at least the first year, and likely until you get your IA rating.  Count on $2000-$3000 added to my numbers above.

 

Good luck!  (with aircraft, most of us need it!)

[Hank]

7 minutes ago, A64Pilot said:

Houses have become more desirable I think as a status symbol, people often buy the most expensive house that they can qualify for loan wise.

‘I’ve never been a house guy, my Wife however is to some extent, in honest truth anything over say 1200 square ft is to me a waste, but that’s a very specific floor plan, I have no use for guest rooms and extra bathrooms, an office or living or dining rooms.

‘But I like having 3,000 sq ft of climate controlled hangar  

Never buy as much of anything as you can qualify for a loan for. It's no fun when you can't go anywhere or do anything because all of your money is committed to paying for stuff. What will you do when something breaks and must be repaired or replaced? It's easy with a house or a plane to have something happen that is several thousand or more to fix. 

[Steve0715]

1 hour ago, AlwaysLearning said:

At this point my wife is in her carrier as am I. I am looking at ATP due to wanting to change careers and the love of aviation. So yes I am going to go for my IFR as well. I have always disliked renting most expensive things I am planning on using long term preferring to invest in things for me / us. Cars house etc.

You need to go for it!

Flying isn’t any different than many other hobbies.  Do you due diligence in buying.  Have a great time..

[A64Pilot]

Cars unless rare antiques that won’t be driven and airplanes are not investments because they depreciate. I’d argue that often houses are not either, but on average they do appreciate, so it depends like everything what you paid vs what it will sell for, but houses are not guaranteed like people used to think.

But often in hard times antique cars drop more than most other things, because they are a luxury and luxuries of course go first in hard times.

In 08 house prices in Fl tumbled as much as 50% in some places, it took ten years to recover to 08 prices, factor in ten years of inflation and they are just now recovering, and only because inflation was so low, so if you bought in 08 you might be able to sell now and break even having made no money. Huge numbers were foreclosed though, three years ago when we were cruising the intercoastal, there were still empty houses.

Now they are in a bubble I believe, my house according to Zillow is worth 20% more than I paid for it two years ago, but I guess one way of looking at that is it’s keeping up with inflation.

See as I’m sure we all know cost of fuel and food aren’t used to calculate inflation, so I believe actual number is higher than what’s quoted.

 

Foreclosures are I think a marker, low rate, good times are ahead, but increasing foreclosures? Maybe not.

‘Google foreclosure rate

[AlwaysLearning]

46 minutes ago, MikeOH said:

My few cents:

1) Using the term 'invest' in the same sentence as airplane is not wise

2) My M20F has cost, all in, between $14,000 and $18,000 per year over the last 5 years.  It doesn't really vary that much with my hours of 70 to 100 per year.  It's variable maintenance that accounts for most of the difference year to year.

3) You WILL spend way more on insurance for at least the first year, and likely until you get your IA rating.  Count on $2000-$3000 added to my numbers above.

 

Good luck!  (with aircraft, most of us need it!)

Is that including loan payments or just maint, fuel, hanger, insurance, annual... ??

[A64Pilot]

37 minutes ago, AlwaysLearning said:

Is that including loan payments or just maint, fuel, hanger, insurance, annual... ??

I’m sure it does not include payments, double that or more if there is a loan? Depending obviously size of loan.

I keep editing this sorry, but where you are greatly figures into cost, Live in S Ga or Al and a nice hangar is $125 a month, but live in expensive places and it can be many times more.

Heck we swallow $50 an hour in fuel and many will tell you fuel just isn’t a significant expense.

There are ways that can be reduced some, I’m an IA and own my hangar, so I pay a fraction of that, my biggest expenses are fuel and insurence. I honestly don’t know what it costs, I don’t want to know, because I’m logical enough that if I knew I likely couldn’t justify it.

Many years ago my Father told me what a White elephant was, apparently if anyone was climbing too fast, accruing too much wealth or power the Maharajah would gift them a white elephant, a white elephant was apparently extremely spiritual or something, only very important people were allowed to have one, so it was a mark that you had arrived.

But a white elephant being such a very important highly prized thing had to be kept in very luxurious conditions receiving the best of everything, so often the gift of a white elephant became financial ruin to the one receiving the gift, which is why it was given to them.

An airplane can be a white elephant

Then there is the old adage if it flies, floats or f****, rent it.

Years ago I did some math, the break even point of owning vs renting for me was 100 hours per year, and that was only because even then I had free hangar space.

Very often the first Annual or two pretty much breaks the bank, and this forum has many posts of someone buying an airplane and gets the news that it’s going to cost $40K to fix it etc.

I only bring this up to ensure you realize this isn’t like buying a car, buying the airplane is actually not the expensive part at times.

[hais]

7 hours ago, amillet said:

As an estate planning lawyer, my advice to clients is to spend it all before you die.  Maybe even put the last few months expenses on credit cards. You’re heirs are not liable for them.

Any tip how I can figure out which months those will be?

[MikeOH]

1 hour ago, AlwaysLearning said:

Is that including loan payments or just maint, fuel, hanger, insurance, annual... ??

No, the price of the plane and any acquisition costs are not included.  (For personal comfort I buy my toys with cash)

The figures posted represent ALL costs associated with ownership and operation (if I buy shop rags the cost goes into the spreadsheet!)

[A64Pilot]

Using Mike’s numbers if it cost 15K a year and if he flies 100 hours a year, then that’s $150 an hour, but here’s the thing your insurence for a new Private pilot with zero time and no instrument is going to be crazy, so just as a SWAG add $25 a hour for that, now your at $175 an hour and carry a lot of potential liability if you eat a cam or have a prop strike or whatever.

$162 an hour for a 172 doesn’t sound so bad because you prop strike it or it eats a cam it’s not out of your pocket.

Get your Private and your Instrument renting, then look at buying when your insurable for not a crazy number, but finally the insurence companies know what they are doing, there is a very good logical reason your insurence would be so high. At least get an insurence quote before you go any further

[Schllc]

If you have legitimate business use for the plane, and could get some tax deductions and How you actually plan to use the plane is a pretty important factor as well. 
Renting isn’t practical if you actually want to travel. If all you want to do is get a $100 hamburger twice a month a rental will work, but if you actually use the plane, a rental isn’t really anoption. 

Rental insurance has changed, and you better make sure you don’t have to cover more than your rental fees is something happens.  
Safety and proficiency is another factor.
Having your own plane that you maintain, know all the nuances and are comfortable flying is safer than getting into any random rental plane. 

[AlwaysLearning]

52 minutes ago, A64Pilot said:

Using Mike’s numbers if it cost 15K a year and if he flies 100 hours a year, then that’s $150 an hour, but here’s the thing your insurance for a new Private pilot with zero time and no instrument is going to be crazy, so just as a SWAG add $25 a hour for that, now your at $175 an hour and carry a lot of potential liability if you eat a cam or have a prop strike or whatever.

$162 an hour for a 172 doesn’t sound so bad because you prop strike it or it eats a cam it’s not out of your pocket.

Get your Private and your Instrument renting, then look at buying when your insurable for not a crazy number, but finally the insurance companies know what they are doing, there is a very good logical reason your insurance would be so high. At least get an insurance quote before you go any further

Sound advice and makes a lot of sense. At this time research, information gathering, and see if I can find a way to get time in a Mooney. On this thought any ideas how one can get time in an M20 or 201 series Mooney. 

Edited December 11, 2022 by AlwaysLearning

[RoundTwo]

6 minutes ago, AlwaysLearning said:

Sound advice and makes a lot of sense. At this time research, information gathering, and see if I can find a way to get time in a Mooney. On this thought any ideas how I can get time in a Mooney. 

Here ya go…

This one.

[AlwaysLearning]

8 minutes ago, RoundTwo said:

Here ya go…

This one.

Excellent response that's nearly exactly what I would say. Nice

[toto]

32 minutes ago, Schllc said:

Renting isn’t practical if you actually want to travel. If all you want to do is get a $100 hamburger twice a month a rental will work, but if you actually use the plane, a rental isn’t really anoption. 

This.

33 minutes ago, Schllc said:

Safety and proficiency is another factor.
Having your own plane that you maintain, know all the nuances and are comfortable flying is safer than getting into any random rental plane. 

And this. 

[Raymond J1]

The question is: What is the best way to finance the purchase?

Also, you wish to buy (not rent)...

If you are an individual buyer, it's self-financing (no interest).
If you are a company or a legal entity with an accounting management of its activity, it is the bank loan with the interests deductible in financial expenses (the loan costs nothing).

But there will be a second question once the purchase is made: How to finance the operating costs?

And here, we have to be honest, no one has the perfect answer.

Edited December 11, 2022 by Raymond J1

[jaylw314]

7 hours ago, A64Pilot said:

Using Mike’s numbers if it cost 15K a year and if he flies 100 hours a year, then that’s $150 an hour, but here’s the thing your insurence for a new Private pilot with zero time and no instrument is going to be crazy, so just as a SWAG add $25 a hour for that, now your at $175 an hour and carry a lot of potential liability if you eat a cam or have a prop strike or whatever.

$162 an hour for a 172 doesn’t sound so bad because you prop strike it or it eats a cam it’s not out of your pocket.

Get your Private and your Instrument renting, then look at buying when your insurable for not a crazy number, but finally the insurence companies know what they are doing, there is a very good logical reason your insurence would be so high. At least get an insurence quote before you go any further

I'd also point out that if you're renting, flying clubs and schools generally insure the plane (although I think non-owned aircraft insurance is still a good idea and very cheap)

[Sue Bon]

Whatever route you choose to take, my advice is to plan, plan, plan. Make a clear budget for yourself. Maybe even a backup budget in case something unexpected comes up. Airplane ownership is amazing, but it can turn around and bite you.

I am planning to spend my last Franc on my last day, but I'm budgeting for a long life.

[A64Pilot]

Most Retirees that had a plan and followed it upon Retirement die with significant money.

That’s for two reasons, one is you don’t know your expiration date, my plan is 90, but it pretty certain I won’t make it that long, but it’s possible I could go further, but would hate to be sitting in the cold and dark eating dog food if I did.

The second is fear of running out of money due to unplanned issues and the only way to ensure that is to have an excess. What drives this fear is seeing how those live that Retired with no plan, or simply didn’t have the means to execute a plan.

I’m sure every plan shows multiple possibilities, mine has some kind of Monte Carlo simulation that shows a graph of most likely, best case and worst case with of course the extremes getting further apart as time goes by, but to put todays economy in perspective my current plans net worth dropped to a point in one year to where it should be after SIX years of worst case, in ONE year or so.

My plan is very conservative with 50% in bonds, and bonds are usually very safe, but they tubed as well.

Now it’s recovered somewhat, but where we are is not in a good place and would have normally had the news on fire and everyone worried, but the news largely ignores it, and people are hugely influenced by the media.

I assume because of this seeming lack of concern it’s kept prices higher than normally would happen after an economic downturn, and interest rates aren’t high not really just higher than they were and not likely high enough to keep a recession from happening.

So in other words in my opinion it’s not a good time to take on significant debt, then combine that with prices haven’t come down yet and that doubles the effect.

People in my neighborhood often sell and buy different airplanes, latest craze is LSA amphibs, but I’ve noticed what’s been for sale isn’t moving, where a year or more ago they sold within a week or so of listing it seemed, so I think the market has turned, same for houses but sellers haven’t woken up to that fact yet.