StraightnLevel
Line Up and Wait
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- Dec 8, 2023
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StraightnLevel
Window-shopping planes while completing PPL training has left me with more questions than answers in many ways, but the one which really leaves me scratching my head is TCO (Total Cost of Ownership). What's the net difference between buying new, slightly used, and very used?
A priori assumptions:
Assuming a given make/model/type, there is no significant difference between hangar, fuel, engine fund, prop fund, oil changes, liability insurance, and other per-hour variable costs, right? A new Piper Archer is really not much different from a 30-year old in these respects, right?
That leaves me with the difference in capital cost (depreciation and interest) vs. repairs, upkeep, and downtime. Assume all the costs involved have the same potential for business use deduction (or not, as the case may be).
Let's take a Piper Archer. New, it's ~$600K. One that is 40 years old is $100K. Let's say I have $100K cash to spend. That's either outright purchase of the old one, or a $500K 20-year loan on the new one.
At today's interest rates that's ~ $4,500/month in payments, of which roughly half will be interest over the life of the loan. $27K in interest/year.
The math is similar for a Cirrus SR22, but with less difference between new (<$1.1M) and used ($250K+ for 20-year-old, needing significant work).
There's also depreciation, but with the way pries are inflating it would seem that good aircraft are holding value fairly well. The old one probably depreciates less, but it seems minimal to me - am I wrong about this?
Now we get to repairs in unscheduled maintenance, ADs, etc. I assume that for a new plane it's going to be fairly low for at least the first 10 years / 1,000 hours. The experience I am seeing with our school planes and what I've heard from friends with older planes leaves me wondering how much to expect in real-world costs per year for the "experienced" one. Aside from the engine and prop per-hour funding, what is a real-world expectation for the things that are going to break or require maintenance that goes beyond oil changes and ELT batteries? How do I put together a costing plan for a given make/model/type? I hear stories of $25-50K annual on relatively pedestrian planes....and that leaves me wondering if there is a point (as there is with cars) where the economics do not favor trying to coax an older plane to stay airworthy as opposed to buying a newer model.
At some point, even if the cost is marginally lower for the older plane, does the likely downtime offset the cost to the point of making the older ones non-viable for regular use? I see a whole lot of planes in rented tie-downs and covered spots that don't look as if they have moved in years.....???
Then there is the option of buying something REALLY old like an early Bonanza, and biting the bullet up-front for a restoration project. Does that approach address the unscheduled maintenance risk, or is it still going to be an old airplane that takes a bite out of my wallet every 6-9 months?
Thoughts?
A priori assumptions:
Assuming a given make/model/type, there is no significant difference between hangar, fuel, engine fund, prop fund, oil changes, liability insurance, and other per-hour variable costs, right? A new Piper Archer is really not much different from a 30-year old in these respects, right?
That leaves me with the difference in capital cost (depreciation and interest) vs. repairs, upkeep, and downtime. Assume all the costs involved have the same potential for business use deduction (or not, as the case may be).
Let's take a Piper Archer. New, it's ~$600K. One that is 40 years old is $100K. Let's say I have $100K cash to spend. That's either outright purchase of the old one, or a $500K 20-year loan on the new one.
At today's interest rates that's ~ $4,500/month in payments, of which roughly half will be interest over the life of the loan. $27K in interest/year.
The math is similar for a Cirrus SR22, but with less difference between new (<$1.1M) and used ($250K+ for 20-year-old, needing significant work).
There's also depreciation, but with the way pries are inflating it would seem that good aircraft are holding value fairly well. The old one probably depreciates less, but it seems minimal to me - am I wrong about this?
Now we get to repairs in unscheduled maintenance, ADs, etc. I assume that for a new plane it's going to be fairly low for at least the first 10 years / 1,000 hours. The experience I am seeing with our school planes and what I've heard from friends with older planes leaves me wondering how much to expect in real-world costs per year for the "experienced" one. Aside from the engine and prop per-hour funding, what is a real-world expectation for the things that are going to break or require maintenance that goes beyond oil changes and ELT batteries? How do I put together a costing plan for a given make/model/type? I hear stories of $25-50K annual on relatively pedestrian planes....and that leaves me wondering if there is a point (as there is with cars) where the economics do not favor trying to coax an older plane to stay airworthy as opposed to buying a newer model.
At some point, even if the cost is marginally lower for the older plane, does the likely downtime offset the cost to the point of making the older ones non-viable for regular use? I see a whole lot of planes in rented tie-downs and covered spots that don't look as if they have moved in years.....???
Then there is the option of buying something REALLY old like an early Bonanza, and biting the bullet up-front for a restoration project. Does that approach address the unscheduled maintenance risk, or is it still going to be an old airplane that takes a bite out of my wallet every 6-9 months?
Thoughts?
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