Financing Options??

tonycondon

tonycondon

Gastons CRO (Chief Dinner Reservation Officer)
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Tony
Im curious what others have done. Im becoming very tempted to get into ownership of powered aircraft. Mostly looking at Cessna 140's and 150's.. Ive got good credit but nothing really useful for collateral If I wanted a loan for a car they wouldnt blink an eye. Hell, if I wanted to put it on my credit card they wouldnt even care! But it seems like airplanes are a little more difficult. I plan to put a call in with the AOPA BoA people tomorrow to see what they have to say, but ive heard that most places will not finance "low" dollar airplanes. Anyone have any luck in this area?
 
Most of the people I have known to do this sort of financing have had better luck using a home equity line of credit. Which I expect these days to be pretty hard to get and I also suspect you do not have a home in which to get a line of credit.
 
Do business with a small locally owned bank and get a good relatioship with them. Especially if you can find someone who has some aviation experience.

You can get a loan on an small airplane just like buying a house. Usually a loan 75% of value so you will need some down. Get it on a 5 to 7 yr or shorter.Pay it off as soon as you can. this a geat way to build great credit and and trust with a local bank.For our next purchase. You are not talking about much money for a bank to loan, similar to a used truck for a good 140 or 150.

I prefer to not go with a LONG term loan. Paying all that interest is bad business. Remember cash is king


Good luck
 
i understand simple financial principles. i dont own a home. I know im not talking about much money which is why its frustrating.
 
Two years ago I had no problem with the AOPA / BoA people on a an old low value plane. Of course that was then.
 
My credit union will finance any aircraft dollar amount up to 85% of appraised value :confused: Are you saying some folks are taking a pass because of the size of the loan?
 
ive heard and read that some banks are not willing to finance airplanes below a certain amount. and I think that amount is generally somewhere in the 30's and up.
 
tonycondon said:
ive heard and read that some banks are not willing to finance airplanes below a certain amount. and I think that amount is generally somewhere in the 30's and up.
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Tony, I think you won't have too much of a problem once you start calling around, especially if you aren't asking for 100% financing. In the current depression oops I mean recession you may find different credit (score) requirements than a year ago. If you can't get better than 7.5% from whomever you call move on to someone else. Look local too - university credit union, local open membership credit union.

Twice I started down the road to financing a C140 with a financed amount in the mid-teens with no problem, before deciding to buy a 170 instead. Once with AOPA/BOA, once with a credit union.

You could always go to the Bank of Greebo ;)
 
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the first ones i talked to was the credit union i just joined. the credit union that just changed their name from Boeing Wichita Credit Union to something else. Their entire business is based on aerospace workers in the "Air Capital". And the lady is like "Ill have to email the loan dept. and see if they'll do an airplane loan, i've never done that before" and im just like WTF.

/rant off. thanks for the advice richard. :)
 
tonycondon said:
the first ones i talked to was the credit union i just joined. the credit union that just changed their name from Boeing Wichita Credit Union to something else. Their entire business is based on aerospace workers in the "Air Capital". And the lady is like "Ill have to email the loan dept. and see if they'll do an airplane loan, i've never done that before" and im just like WTF.

/rant off. thanks for the advice richard. :)
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Maybe it's an Alaska thing, up here they probably finance more airplanes than boats (and they do a lot of boats.)
 
I have to agree with the post to find a smaller local bank or credit union that has financed aircraft before. We used to have a local Bank Manager that did this very well. He moved to at least 3 different local banks and his aviation customers followed him. When the bank he was working for would be bought out by a bigger bank he moved on to where he could be an actual manager and not just a paper pusher to the main office.


I financed my sailplane with him it was easiest loan I have ever done. I walked in told what I needed. He said sign here and handed me a check. Well, maybe not quite that easy, but pretty close. Ask your local pilots it probably won't take long to find out where to go for aircraft loans.

The current economic enviroment is making thing crazy for loans, or so I am hearing. I got out of borrowing money about 4 years about and don't plan to go back. I have heard that the requirements are getting very difficult and unreasonable. Things like early payment penalties and other unusual requirements. So be careful out there.

Brian
 
Tony,
The Bank Of Bolivar in Bolivar, MO is very aggressive when it comes to airplane loans. They do not have a minimum amount like most banks do. They will loan on fixer uppers and do a loan based on what you plan on doing to it, kind of like a construction loan. The Pres or VP is a member of the Bolivar Chapter of the Missouri Pilots Asso, so maybe Jim Shawley will jump in here and give you his contact info. They will also do experimentals, which most banks wont touch.
 
Tony, In the back of most aviation trade rags (especially trade-a-plane), there are a ton of lenders. If your Credit score is solid and your debt / income ratio is good, I see no reason why the wouldn't loan you 20K and up. If you are buying through a broker, they usually have a relationship w/ a lending instutition that specializes in aircraft loans. Also, check w/ your FBO and ask who they use. Good luck!
 
Antonio:

You should not "hang it up" until you have done some checking around, and I bet that you can get it done with a local bank much more easily than with BofA. THe bonus, of course, is that you would not be feeding cash to the antichrist, either.

Joking aside, though, while it has been desperately important to many in the the mainstream media that we all feel mortified and panicked about the economy in general, and about banks in particular, you may be surprised to find that many smaller local and regional banks are doing just fine, and have plenty of money to lend to qualified borrowers.

Make sure that you don't over-pay, have a solid down-payment (25% would be a good place to start), and ask around the local airports to find out who has been known for making airplane loans. I'll bet you can find someone who is quite willing to make a loan to a solid citizen (check), well-employed (check), on a sound aircraft (presumably, check) and well-secured (with appropriate down-payment, check).

It was me, I'd hunt down the best flying club in the area, and ask them, "...who is the banker in this group?"
 
SCCutler said:
Antonio:

You should not "hang it up" until you have done some checking around, and I bet that you can get it done with a local bank much more easily than with BofA. THe bonus, of course, is that you would not be feeding cash to the antichrist, either.
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You were joking? :devil: My wife brought BofA into our marriage and back into my life, post-exorcism. It was almost a deal-killer. But we are at the mercy of the Alaskan Airlines mileage program. Sigh. At least I got her to close her checking and savings accounts. It took weeks to extricate ourselves from their tentacles.
 
alaskaflyer said:
My credit union will finance any aircraft dollar amount up to 85% of appraised value :confused: Are you saying some folks are taking a pass because of the size of the loan?
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Yeahbut your credit union is in Alaska. :D

Mine is with a local bank that was tipped off how aircraft finacing works by the guys from my airport. The bank was sold, which makes me wonder if the bank will be so happy about the business when my 5 year note rolls. It probably depends on how the rest of the notes they over have been paid, which I suspect is with no problemo.
 
Tony: Lots of good advise above. Aviation Capital; Dorr and some others advertise in TAP and I have used them both. The have excellent relationships with a bank lender. Will do up to 20 year amortization on newer planes and are very competitive rate wise. Banks have cheaper money than finance companies. Credit unions also have cheaper money than finance companies because they have deposits. The trick with banks and credit unions is to find the ones that like aircraft loans. It's difficult to get a bank to make a loan type they are not comfortable with unless you're a big customer.

As has been said, ask around. Call Aviation Capital and Dorr and see if they will refer you somewhere if they won't finance it themselves.

Home lines of credit can be good, but a default could cause one to lose their home: ask some California folks that did that a couple years ago.

I prefer a longer term, fixed rate, fully amortizing loan. One can always pre-pay, but if things get rough, the minimum payments are less.

Good luck. It wouild be nice to see you become a powered aircraft owner <g>.

Best,

Dave
 
tonycondon said:
i understand simple financial principles. i dont own a home. I know im not talking about much money which is why its frustrating.
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Please don't take this as me being a smarta$$ but if it's not a lot of money, why not just save and pay cash?
 
kevin47881 said:
Please don't take this as me being a smarta$$ but if it's not a lot of money, why not just save and pay cash?
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mostly cause it'd be nice to have an airplane next month to make 2 or 3 visits to Iowa, instead of next year...

even 'not a lot' of money to a bank is a fair amount of money to me.
 
My credit union (Navy Federal) finances aircraft at 100%.... at 10.75%.

Hey my first post!
 
Welcome Michael!

And Tony, all I can say is that Leslie and I have opted to forgo purchasing an airplane for a while, certainly until this credit market smooths out. We decided not to go further into debt at this time.
 
kevin47881 said:
Please don't take this as me being a smarta$$ but if it's not a lot of money, why not just save and pay cash?
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Even with a very frugal lifestyle and minimal living expenses, how quickly can one realistically save up some $15,000? Engineering starting salaries aren't in the $100k range.

If a loan can be acquired, it would make sense so Tony would have a plane to fly for the trips he wants to make that are not the sort of trips that many flying clubs or FBOs want to let their planes out for. Combine that with the fact that Tony will want to do those weekend trips relatively frequently, and you have a very strong case for why it makes sense to try to secure a loan and get the plane. I'd do the same thing.
 
Ted DuPuis said:
Even with a very frugal lifestyle and minimal living expenses, how quickly can one realistically save up some $15,000?
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Both more quickly and less expensively than one can pay off $15,000.
 
Greebo said:
Both more quickly and less expensively than one can pay off $15,000.
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And not only do you get to add in interest, you get add hanger, insurance and maintenance costs to the principal until you actually buy an airplane.

true it might be offset a bit by having to pay rental costs in the meantime.

Brian
 
Tony,

Move up here and I'd split one with you - half the cost then. I'd love to find a local partner in a small taildragger. There certainly have been some real good deals popping up on 120's and 140's in the last 6 months.

Tim

tonycondon said:
mostly cause it'd be nice to have an airplane next month to make 2 or 3 visits to Iowa, instead of next year...

even 'not a lot' of money to a bank is a fair amount of money to me.
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Better idea tim, you move down here! Its warmer, and you're going to need that when you get your Flybaby built. open cockpit: brrrrrr :)

Just called BoA, for loans under 25K their rate is 12.5%. what a joke.
 
tonycondon said:
Just called BoA, for loans under 25K their rate is 12.5%. what a joke.
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Now that is a joke. If you went in and tried to buy a car for the same price you'd get much better financing. I wonder if you could confuse the people at GMAC that it's a Chevy instead of a Cessna? ;)
 
Greebo said:
Both more quickly and less expensively than one can pay off $15,000.
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And your point? Your argument doesn't make sense.

brcase said:
And not only do you get to add in interest, you get add hanger, insurance and maintenance costs to the principal until you actually buy an airplane.

true it might be offset a bit by having to pay rental costs in the meantime.
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This argument makes even less sense, since based on that theory why bother having an airplane at all? After all, it costs money. We should just live in our caves.

You people are driving me nuts with your insistence that debt of any sort is bad. It shows a complete lack of thought or understanding, just like "Guns are bad", "The magenta line of death", or "The second engine just gets you to the scene of the crash faster". It's reactionary, and I would bet indicates a poor decision made at some point in the past (such as going into debt to buy that 72" ubertron TV and home theater system) that therefore has those of you arguing the point convinced that there is no good reason whatsoever to go into debt.

Loans and debt, like any other tools, are bad when misused by people who don't understand the uses and limitations. Tony's smarter than that, has a good understanding of the risks, how to mitigate them, and also why it makes good sense for him to go this route. Stop lecturing him based on paranoia. If you don't have an answer to his actual question, don't post.

Flame suit on, rant over.
 
Also, for the record, I'm done with this thread. No point in arguing with brick walls, but I did want to at least put my point out there for the non-walls who were interested.
 
Ted DuPuis said:
And your point? Your argument doesn't make sense.
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If you don't understand my point, how can you presume to judge the argument?

My point is, if he saves up the cash, he will pay less in the long run for the plane than if he borrows to have it now.

Of course, to get a complete comparison, one must do a full TCO workup vs. a TCR (R=rent) workup to compare rental costs vs all those ancillary costs associated with ownership.

This argument makes even less sense, since based on that theory why bother having an airplane at all? After all, it costs money. We should just live in our caves.
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That is a straw man. brcase is simply discussing the true TCO.

It's reactionary, and I would bet indicates a poor decision made at some point in the past (such as going into debt to buy that 72" ubertron TV and home theater system)
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And that's assumption.

Stop lecturing him based on paranoia.
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You seem to be the one lecturing here, not us.

If you don't have an answer to his actual question, don't post.
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Not your call.
 
I assume TCO is True Cost of Ownership vs. TCR as True Cost of Rental?
 
True or Total - though if true, then what I said previously was redundant. ("true tco")
 
gotcha, im pretty sure that for the flying i want to do, it makes sense to get my own airplane. ill do the flying either way, but if i rent from the club ill pay a bunch more in rental and daily fees, which will make saving for my own airplane a challenge. plus after a few years of my own airplane, ill have an airplane. after a few years of renting, i wont. and theres a personal value to that that is hard to quantify.
 
Other TCO considerations should be how often are you *really* going to fly? A few trips in the upcoming months doesn't necessarily mean you're going to be flying so often that, over the same period of time, it makes sense to buy vs. rent.
 
tonycondon said:
gotcha, im pretty sure that for the flying i want to do, it makes sense to get my own airplane. ill do the flying either way, but if i rent from the club ill pay a bunch more in rental and daily fees, which will make saving for my own airplane a challenge. plus after a few years of my own airplane, ill have an airplane. after a few years of renting, i wont. and theres a personal value to that that is hard to quantify.
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I agree -- they type of plane you want to own (low operating costs, relatively low mx costs, low insurance costs, etc.) doesn't require offsetting HUGE costs with club/FBO membership.

Greebo said:
Other TCO considerations should be how often are you *really* going to fly? A few trips in the upcoming months doesn't necessarily mean you're going to be flying so often that, over the same period of time, it makes sense to buy vs. rent.
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Speaking from experience with Tony, he'll fly the living snot out of it. And that's a LOT!. ;)
 
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