Interesting airplane purchase option

X3 Skier

X3 Skier

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I went to my first meeting of my new club. The FBO co-owner has a proposition I am considering.

The Club needs to build up the fleet and the FBO has offered to "partner" with membes(s) of the club to acquire more aircraft. The deal is, the member(s) buy the airplane and the FBO/Club buys it back over a period of time with a monthly payment @ 5-6% implied interest rate while using it as part of the Club Fleet.

The devil is in the details about access, rates when the owner uses the aircraft (most likely the standard use rate), insurance, term of the "loan" etc. The FBO/Club would be responsible for all maintenance etc.

Basically, the member(s) are loaning the Club/FBO the money for the purchase of the airplane at 5-6%. I don't really want to be a bank but the interest sure beats leaving money in the bank at <1%.

Comments?

Cheers
 
Sounds good, but what happens if they default? U still get to keep the aircraft correct?
 
If you can't spot the patsy at the table...

I'm sure Wayne will be along shortly to fill in the details.
 
Who is the named insured?

Do you get the insurance check? or does the club?
 
The risk appears to substantially outweigh the benefits based on the information provided. At the imputed interest rate you are being asked to accept a debt return for an equity risk.

I obviously haven't seen your paperwork, but have seen a jillion (or thereabouts) others. If there's one thing you can bet on, it's that most FBO deals will be heavily slanted away from you.
 
X3 Skier said:
I assume so since AFAIK, the members(s) have the title. Another detail to be examined.

Cheers
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Only reason I ask is if the plane goes into there name then you would have to sue them to get it back and that would be a pita. If it stays in your name then I guess you would transfer ownership at the end of the term and payed in full. If you are going to risk the money, maybe a bit more return would not be much to ask for.
 
BTW, we are talking Warriors in the $35K range. The Club just acquired one I have been flying and it is in very good condition.

Cheers
 
Just about any reputable mutual fund will earn you more than 5% with considerably less risk.
 
Fearless Tower said:
Just about any reputable mutual fund will earn you more than 5% with considerably less risk.
Click to expand...

I think the concept, is you become a bank who if the borrower defaults, wants the product.

That's a little different. I would ask what happens if the FBO stops paying. I would want some money up front.
 
Fearless Tower said:
Just about any reputable mutual fund will earn you more than 5% with considerably less risk.
Click to expand...

That's where just about all my savings are but there is something special to be able to say "I took my airplane out for a flight today" rather than "I made 5% on my IRA last year". :D

This would be discretionary spending I can afford. ;)

Cheers
 
The hole in that theory is the price at which the lender wants it back. If the engine stops making noise, what's it worth?

Mafoo said:
I think the concept, is you become a bank who if the borrower defaults, wants the product.

That's a little different. I would ask what happens if the FBO stops paying. I would want some money up front.
Click to expand...
 
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