In Plane Sight
Contrary to the general public’s opinion, buying a plane is nothing at all like buying a car. It is a painstakingly tedious process. Given what’s all at stake, it should be. It either requires deep pockets or a pair of cargo pants with multiple small pockets. Long story short, the bottom line is the bottom line.
Meet Mr.Herbert Moss. Recently, Mr.Moss expressed a serious desire to purchase his own aircraft for dual purposes. First and foremost to ferry him directly to Detroit where he renovates commercial properties. Secondly, the aircraft would be used to ferry family members cross country for family reunions. Upon meeting me, Mr.Moss merely thought that it would as simplistic as if he were purchasing a vehicle from the local Bessemer, Alabama auto dealerships such as Town and Country Ford or Premier Chevrolet. I gave Mr. Louis a thorough walk through of the process as any customer service oriented broker would – as if I were purchasing the aircraft for myself Mr. Moss got a first rate
walk through of the Bessemer Airport and the wonderful world of private owned aircraft.
This is quite obvious will be his first time acquiring an aircraft. I first had to distinguish to him, the difference between a private jet and private plane. Given his needs and the fact that this would be his first aircraft, a propeller driven aircraft would be his best bet. Too many times, customers tend to purchase, or at least attempt to purchase with their eyes and personality rather than what the aircraft would be used for. Because this is his first time at the rodeo, and for the intended purposes of him purchasing his plane the first factor of consideration is that his plane should be a used one.
In his case, the plane will not be used on a frequent basis, as in not daily or even weekly. By buying a used plane initially, it gives him time to learn and grow as he learns the ins and outs of owning the aircraft and the frequency in which he uses it. Now purchasing a new plane does have its benefits. Now if paying cash outright for a used plane, then it’s understood, you own it. However, if you’re considering financing a used plane, financing a new plane will be your better option.
The benefits of buying a new plane is that allows you to pay lower interest rates on your loan. Second, because the plane in Mr. Moss’ case would be used to conduct business for his company, he can deduct 100% of the purchase of the plane and maintenance/upkeep (including fuel, tie-downs, hangar fees, and landing fees), up to $225,000 annually. One year after the initial purchase, he can keep the deduction if the plane was used for business purposes at least 50% of the time. He would be able to only claim the depreciation for the time the aircraft was used for his business, not transporting family members. All of these factors for tax deductible considerations are listed in the IRS’ Section 179 method. Thirdly, a new aircraft will come with a longer warranty due to having no previous owner and wear and tear.
We already established that the ideal initial plane would be a used propeller plane. The next factor is that of budget. Mr. Moss stated that he’s working with a budget of $225-$250K that he can guarantee. Once you declare a budget, remain solid and true to it. By refusing to remain within budget opens one up to shopping with their eyes rather than pockets. I explained to him that by being willing to alter your budget leaves one open to bad decision making and the likelihood of a bad purchase. I’ve known of cases where potential buyers who knew that they would be pushing their financial envelope, were eyeing a particular aircraft simply because they were attracted to the paint scheme/color. Some were more concerned about amenities and cosmetic features more so than engine performance. Because of such vanities, the potential buyer was willing to consider a bigger budget and finance options that later proved unavailable to him or at a higher cost in the long run.
I then relayed to him the theory of the dynamics of flight, the core value of aircraft. What distinguishes the aircraft from other modes of travel? The aircraft allowed passengers to travel over greater distances, unhampered by traffic, road repairs, red lights etc., at a shorter time, due to speed. Speed is what you need. But speed costs. The real question that I had ask himself was how much sped did he really need to meet his destination goals? Travelling from Bessemer, Alabama to Detroit, Michigan or the Midwest to meet family, how fast does he ever have to be there? Extra knots, particularly in the double digits will cost some 20-30% of the price of the plane. These are very pertinent questions to ask for they have substantial bearings on costs. After all, this is why a turbine engine aircraft costs more than prop driven. I then used this as an opportunity to break down fuel costs as well as maintenance and upkeep.
Different aircraft have different purposes and capabilities. In terms of automobile comparison, many desire a Porsche, Lamborghini, and Ferrari when in fact what they need is a good Toyota or Nissan. Many first time buyers tend to fall in love with the first suitable aircraft that they come across, without thoroughly examining into intricate detail, the long term costs as well as benefits. Therefore many develop an “I’ve got to have THIS one!” mentality. This is why it is very important observe and practice the “90% Rule”. The 90% rule states that you obtain an airplane that meets your needs 90% of the time, and rent for the other 10%.
I took this opportunity to enlighten Mr. Moss on how a plane that is constantly on the ground is not a good sign. If you’re not flying, financially you’re dying”. I then explained to him the values and virtues of shared ownership. Shared ownership can minimize expenditures in half and is a sound business move. Aviation is a very expensive industry. It costs to be the boss. Therefore any potential buyer has to take into account all certain expenditures and potential expenditures and formulate a host of strategies to offset them.
Now purchasing a plane isn’t at all like purchasing an automobile where you simply trek down the nearest Ford, Chevrolet, or Nissan dealership and a couple of hours you’re riding into the sunset down the highway of happiness. Where does one get the ideal aircraft? Well, there’s victory in variety. Many who are knowledgeable of aircraft are very familiar with the major publications such as Trade-A-Plane.com, Controller.com, Barnstormers.com, and a host of others. However, there are groups on social media that offer aircraft for sell. Many bargains have been found by using social media. Bulletin boards at local airports and FBO’s can also be found.
Insurance and legal counsel are two major areas of exclusive discussions by themselves. These two issues alone can ultimately ring the death bell for owners and pilots. It is paramount that you get an insurance broker/producer with years of expertise. Insurance is expensive until you need it. Ask experienced insurance policy holders and those who’ve had years, even decades of experience. Aircraft are insured on “agreed value” basis. This often leads to an owner insuring the aircraft for less than its worth. Then, unfortunately the aircraft is damaged beyond what the policy will cover. Secondly, you must determine your needs for the aircraft which correlates into what you will be expected to pay. Search for an insurance broker with a proven track record for saving money and finding ideal insurance plans. Another factor is seriously screening who will be flying the aircraft. In Mr. Moss’ case, he has two relatives, one a military pilot and another a civilian pilot whom he’s looking to employ to fly the aircraft for him. Oftentimes, as an act of good measure, it’s good to take your insurance broker/provider and allow them to fly on the plane if possible.
Maintenance is yet another major area to consider when purchasing an aircraft. Aircraft mechanics are the ones that ultimately keep you going up and minimize the possibility of abruptly coming down. I took him next door to The Aircraft Maintenance Company and gave him a thorough tour of their facility. He clearly saw that obtaining a plane is easy. The real challenge is ensuring that it remains flight worthy. What are some key points of light to consider when looking for a great mechanic? I turned to my good friends at the AOPA.
A helpful tip from the AOPA is for potential owners to simply ask around among fellow pilots/owners, managers of local FBO’s or flying clubs who can steer you to a reputable shop. Ask them how do they feel about their mechanics. I also referred him to an easy read, written by Nate Anglin, the CEO of Skylink Group. The name of the book is entitled, "10 Ways To Avoid Being Scammed With Your Aircraft Component Purchase". This is a very valuable tool to have in order to minimize being victimized by predatory aviation companies. The care your aircraft receives is obviously an important aspect of deciding which aircraft management company will be the right fit. You will want a knowledgeable and efficient manager to be on top of things when it comes to dealing with routine maintenance inspections or unexpected mechanical issues. It is also important that your manager is current on mandates and regulations in order to ensure that changes or upgrades are always compliant. If your aircraft management company is not up to date, it could unfortunately lead to unexpected delays or costly rework. An ideal industry leader that I recommended was Latitude 33.