Financing an affordable plane, or, is aviation REALLY available to the masses

Okay, I'm new to this endeavor, although I have wanted to be a pilot all my life. I am now 51, the kids are all through (or about to be) with college, and I figure it's time to finally pursue my dream. I have been a KitPlanes subscriber and reader for the last 15(?) years. I have joined EAA. I have been a YouTube junky for the last 3 months. I have joined several discussion boards. I have read multiple articles. The one subject that I see a lot of talk about with the EAA movement and the AOPA is they like to claim that PPLs are being opened up to the middle class, especially with the old fleet of Cessnas and Pipers from the 60s being so cheap on Trade-a-plane and the like. These days you can finance your PPL training. Insurance doesn't seem like a huge expense. I was getting excited!

So here is a real-world example of hopes dashed, and I hope someone out there can tell me "it's not that bad... what you experienced is not the norm everywhere you go."

I had decided that the most economical path was to purchase an old Piper 140 in which I would get my training. The flight school I investigated gives 2 prices for instruction - $40 per hour + the cost of the rental, or $45 per hour in your personal plane. I think they have a Piper that they charge $120 per hour for rental. So I figure it wouldn't take much past a couple hours per month using my own plane to at least break even. I found a couple $20,000 +/- planes for sale. Not saying I would take either of those planes, just running a "what if". I have also seen on the EAA site that they are affiliated with (an unnamed airplane finance company), and that you can finance your plane purchase up to 20 years. So I jumped on their convenient calculator. $167 per month. Cool! Insurance looks like about $750 per year, so that's like $62.50 per month. Hanger fees.... are you kidding? Okay, tie-down fees at the airport I want to take lessons from are $75 per month. Then there's fuel and oil. The annual will require me putting back about $100/mo into a savings account, and that's if nothing needs to be fixed at the annual. So now we're up to about $400 - $450/mo. That's fine. That's all good. That's just 4 hours of instruction to break even. I can do that, and then some.

Then I call the (unnamed airplane finance company)... Oh, no sir you can't finance a $20K plane for 20 years (I kinda get that). You could only get 10 years financing for a $20k plane. No, if you finance (not purchase price, but finance) $25K or more you could go to 15 years. And you need to put 15% down. So now $25,000 / .85 = $29,411 - I've got to buy a $30,000 plan AND have $5000 as a down-payment to get a 15 year term. But that's cool... @ 7% interest, that's $226.07, so now we are up to ~ $510/mo... oh, wait, insurance is higher because of the more expensive plane you just bought. Now that cost is up to $80/mo. So now... $515/mo.

And after all that, I still wasn't deterred. Until I called another financing company to check on competitive terms. I found out I didn't ask enough questions. Like closing costs. This FC wants over $2000 in closing costs. What's my credit rating? (redacted- but what one would consider "good" - well over 700) What's my debt ratio? What are my monthly debt bills? "Multiply that figure by SIX. I said SIX... That's how liquid they want you to be. We are talking north of $12,000 + the $5000 down payment, + the $2000 in closing costs. That's nearly $20,000 they want me to have sitting around in savings to buy a $30,000 plane?

Now people, I'm not saying I don't have that. I'm not saying it is fair or unfair. All I'm asking is, is aviation REALLY available to the middle class? Because The scenario I just painted is, in my opinion, a MINIMUM situation. Nothing could be described in that as extravagant. Please. Tell me I've got this all wrong.

Home equity loan!

I suppose...

Airplane finance companies seem to be for people buying really, really expensive airplanes. If you're on a budget, you will very likely find much better options on your own. That was my experience. Look at it like buying an older used exotic or sports car for, say, $25K or more. Say you 're buying an 80s vintage Ferrari. You're pretty much on your own, really. Save up cash, get a HELOC, whatever. Just make sure you have a plan and a budget.

Finding a partner/co-owner or two, or a flying club, will make things A LOT more palatable. You're not going to be flying every day, why pay for the airplane every day? One co-owner cuts your purchase and fixed costs in half. Ad a third and you're paying 1/3. Yes, you need to be careful about how you do it, but I'm here to tell you it can be done. I pulled operating agreements from several sources and built one that fit our structure and airplane. We have two owners and we're thinking of maybe adding a third.

One more thought. It might be more convenient to do your training in a Cherokee or a 172, but if you've been a Kitplanes subscriber and EAA member, you oughta have figured out by now that a solid used Experimental can be a fraction of the cost of a certified plane to own and operate. Just as a single example, our RV-12 cost more than a Cherokee, but we figure our operating cost -- all in, wet, including overhaul reserve -- at about $33 per hour. And it's quite a bit faster, too, while burning premium from the corner gas station at about 5 GPH. The last annual cost us less than $200.

Try your local bank/credit union instead of an aircraft finance company. You might be pleasantly surprised although you might have to shop around a bit. First Pryority Bank in Pryor, OK is another option -- they specialize in aircraft financing.

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Originally Posted by ulpilot

Home equity loan!

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No! No! Do not go this route for such a relatively small amount of money. Why would you want to sign over your house(making assumptions that you are mortgage free and the equity is so much greater than the amount you require) for such a small amount of money?

Do this: Go shop around at banks and credit unions and ask them how much they're prepared to give you on a LINE OF CREDIT without any collateral and at what interest rate? Ideally you're looking for prime+1 as the best deal.

While a HE loan may be risky if you do it wrong, it it isn't the wrong answer in all cases. For example, if you have the assets, but you have money in investments earning you more than the loan interest will cost. Or maybe you have the cash, but are not comfortable with wiping out your cash reserve for the purchase. Worst case, you liquidate your investment or use the cash reserve to pay off the loan. Not every HELOC is a bad idea, and the interest rate is usually far less expensive than other routes.

Alaska USA Credit Union does lots of airplane loans. Might be only available in the western states, however.
I would start with a two seater, I think. Can always rent a Cherokee or 172 when needed.

Meh... you can find $15k to $30k Piper 140s all over the place. That's not the problem.

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Originally Posted by Floatsflyer

No! No! Do not go this route for such a relatively small amount of money. Why would you want to sign over your house(making assumptions that you are mortgage free and the equity is so much greater than the amount you require) for such a small amount of money?

Do this: Go shop around at banks and credit unions and ask them how much they're prepared to give you on a LINE OF CREDIT without any collateral and at what interest rate? Ideally you're looking for prime+1 as the best deal.

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Why would you assume I am mortgage-free? I'm talking about the middle class. The middle class do not own their homes outright. A lot of them don't even have a mortgage these days, but rent.