Aircraft purchasing (For Dummies)

rottydaddy

rottydaddy

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Well, I'm finally seriously contemplating buying a plane...
I've been researching this for a while, but there's some things I'm still not clear on:
When applying for a loan, it is specific to the aircraft you're interested in, right? If so, what happens if the loan doesn't go through, or the owner decides to keep it or sell it to someone else? Does one apply for a loan right away, then inspect the aircraft? Are deposits ever refundable?

And what comes first: applying for a loan, offering the owner a deposit, or inspecting the aircraft?

In a nutshell, I'm clear on what steps are required, but how it all goes together is not clear.

I could probably ask these questions of a lender, but I'd prefer to ask owners who've been through the process and aren't trying to sell me a loan. ;)

If anyone has any insight I'd appreciate it... but bear in mind that I'm not looking for advice on what plane to buy or a comparison of ownership vs renting, etc... just trying to figure out how best to proceed based on the assumption that I will be borrowing money towards sole ownership of a used aircraft.
 
Much like buying a house, an aircraft loan will start out as a general preapproval, based on your creditworthiness. So you'll have an idea of the terms, down payment required, and the amount of money you will have to spend, and whether you can use some of that money for enhancements to the airplane.

Once you have a specific airplane in mind, and are ready to close on the deal, your lender will require information about the plane to determine that the value of the airplane is enough to secure the loan. The lender may or may not require a certified appraisal of the airplane.

I recommend you apply and prequalify for the loan, so you know your operating parameters. Then you go and find the airplane, have it inspected (by an A&P who works for YOU, and I suggest having him do an annual inspection if the current owner agrees), then you check back with your lender for any gotcha's, then make an offer.

Right now it's a buyers market for most airplanes, and unless you're in a competition for a specific airplane, you won't need to put a deposit down unless there will be a delay in coming through with the final payment.

Try not to fall in love with the airplane until after you've bought it.
 
1) find the airplane you want.

2) Make a reasonable and realistic offer based on the planes value contingent on a third party pre-buy inspection.

I used the Aopa valuation feature on a lot of similar aircraft and was able to find one or two actual appraisals on the make and model I deceided on. Then you can be confident in what you are paying for the plane and that the loan company will finance it.

3) When finding a third party to do the prebuy I made sure that they were not the A&P that worked on the plane for the current owner. I then used the A&P mechanic at my home airport to control, review and explain to me what was being discovered.

4) For me once I had finalized the decision to purchase and had the insurance lined up the loan company handled the paperwork filing, wire transfer, etc.

The key is CONTINGENT on PREBUY and GET ONE!!!!!

Good Luck
 
If you have a good rapport with your local aircraft broker/FBO, there is a blue book on aircraft values. Much like the AOPA online valuation service, this is a matter of looking up the individual options and totaling it out.
It helps to have a few estimates to work with.
You should also check with an insurance broker. The cost of said insurance might also price you out of the market.
 
I have purchased two airplanes the last two years and looking for three. I have found that using a locally owned bank was the only way to go. I had a good relationship already established with my banker and he was more than happy to work with me. I was able to secure a loan for 80% of purchase @ prime +1%, I had the option of 10 or 15 year terms. He charged me $5.00 for the FAA title CD and the the FAA lien filing fee. There were no other charges attached to the loan. As for a deposit, I only had to do that on the first one due to the seller using a broker. There are so many airplanes out there for sale by owner, I see no reason to use a broker. Have your A&P do a pre-buy inspection, that way you know what you are getting for your money. I always tell mine that he is going to have to live with what I buy, and if he doesn't want a big headache, he better do a good inspection. Also, I would not buy one off ebay unless you can get there before the auction ends to do the inspection. If someone wants a non-refundable deposit, run away and fast. If the seller is a good seller and is representing the airplane correct, he would have no reason for a non-refundable deposit.
 
Dean said:
Have your A&P do a pre-buy inspection, that way you know what you are getting for your money. I always tell mine that he is going to have to live with what I buy, and if he doesn't want a big headache, he better do a good inspection.
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Some great advice in your post, but that is the best!! :D

This will be my first airplane, so this "babe in the woods" appreciates the help; thank you.

I will admit that I am hesitant to approach a bank as opposed to an aircraft-loan specialist, mostly because I am in the lower bracket as far as credit scores go (mostly because of a brief history for my age, but yeah, I've had some bad debt in the past). Fortunately, I am thinking about 25-30K towards a very modest airplane (thinking C-140 here; there seem to be a lot of good ones out there at very fair prices, and I have recently become addicted to taildragging), so maybe my chances are good, even though I will no doubt get my nose opened up on the interest.

I just wish there was a way to assess my chances of securing a loan without risking a rejection on my report... if anyone has any advice on that (other than "forget it and wait until you have the cash in hand!") I'd appreciate it.
I'm just sick and tired of renting, and I don't want a share in a fancy plane... just something to call my own for a while.
 
Get a mentor that has bought an airplane before and perhaps is currently owning a model similar to yours. Take them with you when you visit the multitude of derelicts that you will be looking at so that you can spot the real gem when it is finally found. Be prepared to be scared at the amount of junk that people will try to pawn off on you.
 
smigaldi said:
Get a mentor that has bought an airplane before and perhaps is currently owning a model similar to yours. Take them with you when you visit the multitude of derelicts that you will be looking at so that you can spot the real gem when it is finally found. Be prepared to be scared at the amount of junk that people will try to pawn off on you.
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Sound reasoning. I already have a couple of people in mind.

Believe me, I'm prepared, but not scared: after all, I've bought six cars in the last twenty years, and none of them were new...some people have a lot of nerve... :D
 
rottydaddy said:
Believe me, I'm prepared, but not scared:
Click to expand...
You will be, you will be

td6yodaheadcloseup.jpg


There was one plane I looked at where the oil had not been changed in 250 hours! There were birds nests in the engine and the mechanic had signed off the annual just a month before. When he asked me if I would like to fly the plane I said NO!
 
Eh, what's the worst that happens?

You mess it up before you own it.

;)

~ Christopher

P.S. Obviously I'm not serious.
 
smigaldi said:
There was one plane I looked at where the oil had not been changed in 250 hours! There were birds nests in the engine and the mechanic had signed off the annual just a month before. When he asked me if I would like to fly the plane I said NO!
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this is a good case in point; something I hadn't thought of. "Fresh annual, new this, new that, etc" doesn't mean much when it was some boob or the owner's brother-in-law who did the service...
 
rottydaddy said:
I've heard about this... isn't it only for residents of the Republic of Texas? :D
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Nope, to my knowledge the resident of any state can purchase a ticket. I'm not sure where you'd check to verify the legality in your state, though.
 
t0r0nad0 said:
Nope, to my knowledge the resident of any state can purchase a ticket. I'm not sure where you'd check to verify the legality in your state, though.
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I see now that they recommend you call them... maybe they know the story on that. thanks.
She sure is a beauty... and the Wings & Wheels event looks like a lot of fun; worth supporting the museum in any case.
 
t0r0nad0 said:
Nope, to my knowledge the resident of any state can purchase a ticket. I'm not sure where you'd check to verify the legality in your state, though.
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No, you can be a resident of any state to buy a ticket; but, to win, you have to be a resident of my house. And no, I ain't takin' in boarders.

The plane is mine. :yes:

(Boy, if by remotest chance I win, we'll really have some 'splain to do, won't we? :D )
 
rottydaddy said:
Well, I'm finally seriously contemplating buying a plane...
I've been researching this for a while, but there's some things I'm still not clear on:
When applying for a loan, it is specific to the aircraft you're interested in, right? If so, what happens if the loan doesn't go through, or the owner decides to keep it or sell it to someone else? Does one apply for a loan right away, then inspect the aircraft? Are deposits ever refundable?

And what comes first: applying for a loan, offering the owner a deposit, or inspecting the aircraft?

In a nutshell, I'm clear on what steps are required, but how it all goes together is not clear.

I could probably ask these questions of a lender, but I'd prefer to ask owners who've been through the process and aren't trying to sell me a loan. ;)

If anyone has any insight I'd appreciate it... but bear in mind that I'm not looking for advice on what plane to buy or a comparison of ownership vs renting, etc... just trying to figure out how best to proceed based on the assumption that I will be borrowing money towards sole ownership of a used aircraft.
Click to expand...

Hmmmmmmm... Well, if you are going to borrow money to buy a plane, you do it like a home loan, find the financier first and prequalify for a loan in the payment/ price range you are looking for, then start looking for planes that suit your likes and needs that fall in that region. Then you have to establish that the values of those aircraft match with the valuation criteria the lender is using. Now you can proceed with your due dilligence as with any other purchase.
 

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PM on its way to you as well... Any other takers? (I'm sure Spike is cringing with each of you that say you want to buy one) :)
 
I strongly suggest having a good purchase agreement and using an escrow service.

Speaking with an education from the school of Hard Knocks
 
Not cringing at all, PJ, I am gratified that all these fine people want to contribute to the 1940 Air Terminal Museum (which, by the way, I strongly urge each and every one of you to visit- you'll be glad you did!).

It's still my 140! :yes:
 
Updated (and corrected) picture:
 

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Here's an interesting sidebar - they repainted that C-47 in the background of Spike's picture... here's what it looks like now:
 

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