Going to Look at a Thing

"TheRealBicycleBuck" (therealbicyclebuck) 12/06/2018 at 16:55 • Filed to: None

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It’s a thing I can’t afford, but it’s a thing I can look at! Actually, they are looking for suckers customers who are willing to invest in a plane which would be leased to the flight school for use in training. I’ve heard horror stories about lease-backs, but I’ve also heard that when everything goes right, they can net you a tidy profit. I just don’t know the total risk.

So, I’m going to their event to hear what they have to say and maybe get a ride around the pattern in a brand new plane. This is their pitch:

“This free seminar will answer questions about aircraft performance, depreciation, ownership options, such as leasebacks, and financing. Come meet the experts! As a special treat, Cutter Aviation will have on display a brand new Piper Archer LX equipped with air-conditioning, Garmin G-1000 NXi, GFC 700 auto-pilot with ESP Stability Protection and more! Not only is this beauty on display for you to look at and sit in, it is also for sale! The listed price for this aircraft is $372,400. With the expert speakers on hand to answer your questions and to provide business strategies, this new Piper Archer LX could be yours!”

At that price, it most certainly won’t be mine. But I can hear them out, see if they have some handy tools for calculating the costs, and maybe apply them to something closer to my budget.

Chariotoflove > TheRealBicycleBuck 12/06/2018 at 17:15

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“Come to my free seminar!” I can still hear it in a late night informercial in my head.

But hey, go waste their time and look at the pretty plane.  Post pics.

TheRealBicycleBuck > Chariotoflove 12/06/2018 at 21:22

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Well, it wasn’t as infomercially (new word!) as I expected. They spent a lot of time talking about utilizing the tax benefits and avoiding the common pitfalls when purchasing aircraft for business purposes. I had a chance to visit with the owner of the flight school about utilization rates and finding the sweet spot between airplane cost, rental rates, and utilization. He shared that a $10 change in rental rate resulted in a 200% increase in usage on one of their planes.

They did have one fellow who talked about what banks are looking for when financing planes. He also shared the terms of their typical loans.

It’s time to build a spreadsheet.....

zipfuel > TheRealBicycleBuck 12/06/2018 at 22:22

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Tmeshare syle owning a very fragile expensive vehicle which will then be beaten on mercilessly by novices at the highest utilisation rate possible..... Gee sounds tempting.

Here is an incredibly affordable plane!

https://www.facebook.com/marketplace/item/2178254802414710/

Chariotoflove > TheRealBicycleBuck 12/06/2018 at 22:39

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That does sound less sketchy than what I’ve experienced.

TheRealBicycleBuck > zipfuel 12/06/2018 at 22:57

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The cheapest plane is often the most expensive to own.

Besides, I need something with at least two seats which can be stored outside (no hangar space) and can fly at night.

Besides, I don’t look at this as a timeshare. I’m thinking of it as an opportunity to have better access to a newer plane which is being used to make some money instead of tying up my cash in something that only gets utilized a few hours a month.

I’ll probably buy an older inexpensive plane that meets my needs so we can build hours. But I’m exploring all of my options.

Kiltedpadre > TheRealBicycleBuck 12/06/2018 at 23:12

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Have you looked into fractional ownership with other pilots in your area? It would give you access to a slightly newer plane than you could afford on your own and also help lesson the sting of maintenance cost.

If you can find people with usage needs that match your own it can be a great option.

TheRealBicycleBuck > Kiltedpadre 12/07/2018 at 00:06

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There is exactly one “flying club” in my town. When I called the main contact number, the guy came across as an ass. I thought it might be because he was at work, but he never bothered to return my call. I found out later from someone who knows him that he really is an ass and as a result, he’s the only member of his club.

The next nearest options are at least an hour away.

facw > TheRealBicycleBuck 12/07/2018 at 00:39

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Are flight schools really interested in planes like this? Seems like overkill? Obviously a general purpose flying club might be interested, but it seems like they’d be better off just getting the loan and buying themselves?

TheRealBicycleBuck > facw 12/07/2018 at 06:52

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This particular plane is overkill. I stayed after the seminar to visit with the owner of the school and the Piper dealer. What the owner really wants is a “flight school special,” a new plane without all of the high-end avionics and expensive add-ons like wheel pants. Just look at the dash on the demo plane the dealer brought:

The avionics package is from the Garmin G1000 line. Those flat panels are over $26,000 apiece. A full conversion package with all the avionics from Garmin is over $200k.

What the schools want is one or two planes with touch-screen avionics , then several more with traditional gauges.

The idea is to provide planes that students can afford to rent. It’s a balance between having just enough instrumentation to learn to fly, enough advanced equipment to meet regulation requirements and teach the students how to use modern avionics, and still keeping it affordable.

Becoming a professional pilot these days is really expensive and those costs are carried by the student or their parents. ATP flight school puts the total cost around $76,000 ( https://atpflightschool.com/faqs/pilot-training-cost.html ). That’s either out-of-pocket or financed by Sallie Mae.

Bigger schools focus on training commercial pilots. Smaller schools focus on training private pilots. To me, it’s the difference between a professional driving school for big rigs versus a small school teaching driver’s ed. to high school kids. While the flight school I’m at does prepare some people for a career in flight, most of their students are hobbyists like me just looking for their private certificate.

A lease-back situation benefits both me as a plane owner and the small school. The school doesn’t have the capital to invest in high-end planes and most of the private pilot students can’t afford to rent high-end planes. Being in a lease-back situation would allow me to buy a lot more plane than I can afford by myself, provide aircraft for the training fleet, and if it’s done right, make a little money. It’s a way to own a Ferrari on a Chevy budget.

I still have a lot of research to do before taking the plunge. I’ll probably end up buying an older plane for building hours and having fun, but if the numbers look good, I might be tempted to invest in a more expensive plane too. Just like putting money into the stock market, it’s a risky venture, but I can’t fly a stock certificate!

Grindintosecond > TheRealBicycleBuck 12/09/2018 at 00:54

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Used Cirrus. 1/3 the price of that new Ar cher. Parachute.

TheRealBicycleBuck > Grindintosecond 12/09/2018 at 01:06

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Still over my max budget.

Grindintosecond > TheRealBicycleBuck 12/09/2018 at 14:51

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You do know planes have 30 year loans? (just checking here)

TheRealBicycleBuck > Grindintosecond 12/09/2018 at 18:29

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I do. Thanks for the reminder. The flight school hosted a rep from Piper, a rep from Piper Finance, and a fellow from a tax/ law firm who helps people purchase planes and maximize their tax deductions while minimizing their out-of- pocket costs. Texas is quite favorable to businesses purchasing planes, especially for educational purposes. If I were to buy something with intention of setting up a lease-back, there would be no sales tax in Texas and 100% of the depreciation could be taken in the first year if it would help my tax situation (it wouldn’t). Of course, the interest rates reflect the buyer, the plane, and the intended purpose. By financing, I can limit the down payment to somewhere between 15% and 30%. I don’t think I’m really interested in tying up a large part of my savings with  an airplane.