Tips From a Lending Expert: The Ins and Outs of Purchasing a Plane; Buying Your First Plane

Bank of Montana | Steve GroverSo you would like to buy a plane? Congratulations! There are a few items to take into consideration before you make the leap. Before you get serious about shopping for an aircraft, you need to decide what kind of aircraft to buy.

Buying a first airplane is even more of a thrill for most people than buying a first car. Unfortunately, most first-time airplane buyers approach their purchase very much the same way as they do when shopping for an automobile. Typically, they first decide how much they can afford to spend on buying an airplane, it might be $20,000 or $200,000, depending on their income or obligations, and then they start monitoring Trade-A-Plane to find how much airplane that amount of money will buy.

Before you leap into the prospect of plane ownership it is good to set a mission and plan for how you will use the plane. Make an outline for your plane.

Define Your Mission

Before you think about pricing an airplane, you need to think carefully about how you will be using it:

  • Will you be using the aircraft mostly for short trips or for long ones? How short or how long?
  • How many people will you typically be carrying?
  • How much cargo will you typically be carrying?
  • How fast do you need to cruise?

In addition, there are several key elements to deciphering the actual costs of owning a plane. Can you get insurance, what are the annual costs associated with the plane, depreciation, indirect operating expenses, etc.

Figuring Your Costs

One of the most useful exercises you can perform before starting to shop for an airplane is to do a detailed analysis of what the airplane is likely to cost you to own. To do this, you need first to calculate the hourly direct operating costs such as fuel, oil, 50- and 100-hour inspections.

You will also have to figure the hourly indirect operating costs such as reserves for engine overhaul, based on the anticipated cost of overhaul and the published engine TBO. Even if you do not plan on owning your airplane long enough to have to overhaul the engine, you need to figure this cost because the resale value of your airplane directly reflects hours on the engine.

In addition, you will have to come up with estimates for all the fixed yearly costs associated with aircraft ownership: annual inspection, insurance, taxes, paint and interior, reserves for prop overhaul, hangar rent, and recurring training. You will discover that fixed costs are a major (often dominant) part of the cost of airplane ownership.

Finally, you need to estimate how many hours per year you will be flying the airplane. The average owner-flown airplane is used between 50 and 100 hours a year and only a small percentage of owners fly as much as 300 hours a year. To come up with a total hourly operating cost, divide the annual fixed costs by your estimated number of flying hours per year, then add the result to the hourly direct and indirect costs you calculated earlier:

You need to research the insurance options. Call an aircraft insurance broker (or three), tell them what you are looking to buy, describe your aviation experience, specify what kind of coverage you need (both hull insurance and liability coverage), and find out (1) if you can get insurance, and (2) what it is likely to cost.

As you can see there are many elements to purchasing a plane. Bank of Montana has several aviation specialists who are more than happy to discuss your aircraft ownership goals. If you have any questions please do not hesitate to contact us.

€œAll content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. Please consult an attorney in your own jurisdiction if you need legal advice. The information on this site is just meant to be a guide.€

Comments are closed.