From: geoff@peck.com (Geoff Peck)
Subject: Re: Aircraft Loans
Organization: Geoffrey G. Peck, Consultant, San Jose CA
Date: Wed, 7 Oct 1992 15:50:59 GMT

In article <1aulenINN8fd@usenet.INS.CWRU.Edu> ch491@cleveland.Freenet.Edu
(Pj Pisczak) writes:
> Although I am not in a cash surplus situation (is anybody?) I get the
> nagging feeling that if I don't start planning now that the day [to
> buy an aircraft] may never come.

True.  Financial planning always helps.  Two suggestions which may not
have occurred to you:

(1) If you own a home, or are planning on owning a home, you may
    wish to consider utilizing a home equity loan to finance your aircraft
    purchase.  Such loans are, for the moment anyway, tax deductible, and
    usually carry a lower interest rate than other types of consumer
    loans.

(2) Don't budget only for the capital expenditure.  Maintaining
    an airplane, particularly in the first year or so of ownership, can be
    quite a costly experience.  You should plan on setting aside a minimum
    of 10% of the aircraft's purchase price for unexpected maintenance in
    the first year.

(3) Owning may not save you money, but it will get you a known quantity
    in terms of airplane -- that's a huge advantage.  You should probably
    plan on spending approximately the same amount per hour on flying your
    own plane as you would if you were renting a comparable aircraft
    locally -- assuming that you fly 200-300 hours year.  If you fly fewer
    hours, your airplane will probably cost _more_ per hour to fly, all
    non-capital costs considered.

(4) Do some preliminary expense planning.  Fill in the following worksheet;
    I list some general guesses for a 182-class airplane on the right:
	
	Fixed Expenses
	--------------
	    Annual Inspection		$xxx	/year		$   500
	    Tie-Down / Hangar		$xxx	/month		$20-250
	    Insurance			$xxx	/year		$  1200
	    Taxes			$xxx	/year		varies
	    Loan (interest)		$xxx	/month		varies
	    Loan (principal) [see #5]	$xxx	/month		varies

	Variable Expenses
	-----------------
	    Fuel [see #6]		$xxx	/hour		$ 25    (100LL)
	    Scheduled maintenance	$xxx	/hour		$  3-7
	    "Fixup" maintenance		$xxx	/hour		$  5-10
	    Paint/interior reserve	$xxx	/hour		$  2 *
	    Avionics reserve		$xxx	/hour		$  2 *
	    Engine overhaul [see #7]	$xxx	/hour		$  7-10 *

		* = assuming good condition, low engine time to start

(5) Airplanes typically _appreciate_ these days, rather than depreciating.
    They probably aren't a good financial investment strictly from the
    monetary perspective, but you won't lose money on the capital you
    invest.

(6) Since you're considering an older 182, one which has or can get an
    autogas STC may save you considerable money on fuel.  Opinions on
    the safety of use of autogas vary -- make your own decision.

(7) The engine overhaul reserve can be quite a considerable expense.
    If you expect your airplane to make TBO (time beteween overhaul),
    which may not be realistic on the engine you get with the airplane,
    you can do a simple computation to get an hourly reserve figure:
	engine overhaul cost  /  ( TBO - current engine hours )
    Note that a new engine (which you might elect to put on the airplane
    when you purchase it) may affect this figure dramatically when compared
    to an engine which is close to TBO.  Indeed, in the latter case, you
    may simply want to set aside the overhaul funds as part of the purchase
    expenditure.  Also, don't forget that the price you see for an overhaul
    in Trade-a-Plane doesn't include things like a propeller overhaul
    (probably recommended), installation and removal, new Lord mounts,
    etc.

> I have heard that the banks will not loan on anything older than 20 years,
> even if the airframe and engine have low hours.  I have also heard that at
> one time they would consider a ten year loan, but now have reduced it
> to 5 or 7-1/2 years.

None of these are true.  Contact a lender who specializes in aircraft
loans, such as MBNA.  You can get their phone number from AOPA at
1-800-USA-AOPA.

> How many partners is ideal (assuming compatible personalities)?

Well, it depends on what you mean "ideal".  In terms of scheduling
flexibility, zero -- if you own it, you can go when you wish.  In
terms of moderating costs while retaining reasonable availability,
a good number of partners would be such that the expected number of
hours of operation is in the 200-400 hours per year range.

						Geoff
Newsgroups: rec.aviation.owning