The Idea: Leasing a Plane for/while training.

[tbstanto]

I purchased a PA-28R Arrow after I got my private. I used it for my commercial and CFI, as well as some time building. I bought it with 400 hours on the engine, and sold it with almost 800 hours. I flew it all over the country, and would go on 2-3 day time building trips. I paid $45,000, and sold it for $45,000. The annual cost me about $2500 to replace some fuel lines and a couple other things that added up quickly, but it could have been worse. My tie down fees were about $40 a month, but I did have to keep it outside because there was no hangar space available.

I was lucky and it worked out well. I had talked to a couple of flight schools and looked into doing a leaseback. The problem was, however, even though I paid cash for the airplane, I knew that I would be working as an airline FO and would not have the disposable income to fix things on the airplane if they broke. I also did not have an engine reserve fund started, and I would need to save most of the "profits" from the rental to put back into the airplane. It seemed like too much risk and not enough reward at the time.

I also did not have a newer GPS in it. All of the flight schools really wanted a 430 or better, but I had a KLN-90B. I would have loved to put a 430 in it, but I could not justify the money, and the old 90 worked just fine - as did the VOR receivers.

To be honest, I was pretty happy when I sold it. I was always worried that something was going to happen to it. My landings got to be really smooth very quickly because I was so worried about damaging it. In fact, I sold it with the same brakes and tires it had when I bought it.

 

[uncreative]

At those prices, I only need to fly about 30 hours a year to do better with owning. You should run the numbers. It really surprised me when I started doing the figuring. Even putting in some rather liberal maintenance reserves, renting doesn't make sense unless you're only flying a few hours a year.

$150 X 30 hours would barely cover the cheapest hangar around here, once you got off the waiting list.

 

[SlumTodd_Millionaire]

$150 X 30 hours would barely cover the cheapest hangar around here, once you got off the waiting list.

Hangars aren't necessary. Spend $1,000 on Bruce's covers, and the only thing left to worry about is hail damage, which is so unlikely around here that it's not even worth worrying about. People are way too hung up on hangaring airplanes.

 

[Goonie]

It can be done, but there is risk. What if a student bends the firewall? That's 10k plus a month down. Ask @Goonie what can happen.

I have owned 2 leaseback aircraft.

The first one was a 1978 PA-28R. The very first day I signed the papers for it a couple germans geared it up. The insurance covered the damages but, keep in mind they do not cover loss of revenue and during the repairs the juice is flowing on insurance, premium, and tie-down/hangar space. I lost my ass on that little endeavor.

The second time around I smartened up and just bought an old Mike model 172. Of course, within the first month of ownership the engine popped and I was in the red for 20K on an engine. Luckily the flight school paid for it and I just paid them back monthly for it. I owned it for a little over a year and actually made out pretty good. Sold it for what I paid for it. and probably came out 20K clean after all said and done. There is no where else where you are going to get that return for your investment.

Keep in mind a few things..

Airplanes are not like cars. You can not go in and "sign and drive". You will need 20% to put down. Also, think about expenses like pre-buys, delivery if you are picking up from another part of the country.

Don't get caught up in what you like and think about what will make you money. Owning a 172 is not the most glamorous thing in the world, but they are the money makers and parts are endless out there. I would love to own a V-35, but I know the would be the stupidest thing to try to leaseback.

172s are cheaper hull cost, cheaper insurance and rock solid in the flight training world. If you can, buy a late model 1999 and up. The 70s models are getting too high airframe and some of the parts are harder to find.

Thats if you can find a late model 172. They stay on the market for less than 24 hours so you need to commit and there is no haggling on price.

Crazy story: We had a leaseback owner that bought a brand new 172 19 1999 for $120. Has been at the same school since new with about 8000 hours TT on it now. He could put it on the market now for exactly what he paid for it. Thats insane. Also, he is a Captain for AA and has never even flown his 172. Just comes in once a month and collects his $5000 check.

 

[SlumTodd_Millionaire]

Airplanes are not like cars. You can not go in and "sign and drive". You will need 20% to put down. Also, think about expenses like pre-buys, delivery if you are picking up from another part of the country.

Yep. Having just gone through this process, here is a good list of expenses that you can expect if buying:

1. Pre-buy: You'll probably want to do an entire annual unless the plane is just a few months out of annual. Even then, though, a non-annual pre-buy inspection is still pricey. The plane I bought is just three months out of annual, but it cost me $950 for the pre-buy.

2. Title search: Your finance company will require a title search to be run. Expect $150-$200.

3. Down payment: The best you're going to do is 15% down. Some finance companies want 20%. That said, you can finance it over 15-20 years, so monthly payments won't be bad. But you have to have the cash up front for the down payment. No exceptions on that.

4. Insurance: Your experience level is going to heavily affect this. I got dirt cheap insurance because of my copious amounts of turbine and complex time and my ATP with a couple of type ratings, but I'm still paying $800/year. The average hobby pilot could expect to at least double that for the same plane.

5. Tie down or hangar: Tie downs are cheap. I got one for $56/mo. Hangars are hard to come by in some places (22 people deep on the waiting list at my airport), and they're expensive as hell. Expect $250-$600/mo for hangar space, depending on where you live.

6. Engine reserve: Engines need to be overhauled at around 2,000 hours. You can sometimes stretch them longer, but I wouldn't. An engine overhaul will cost anywhere from $15k-$35k, depending on the engine. That means you need to plan on putting $7.50-$17.50 per hour into a savings account so that you have the money when the overhaul comes due.

7. Prop overhaul: All props need an overhaul eventually, but if you've got a constant speed prop, you're going to want to do this at least every 2,500 hours. These prices vary, but plan on putting somewhere around $5.00 per hour into savings for this.

8. Oil: Again, it varies, but plan on somewhere around $2.00 per hour.

9. Annual inspection: Depending on how complex the plane, anywhere from $900 to $3,000 for a piston single, and that doesn't include any work that needs to be done. That's just the inspection and paperwork. If work needs to be done, the amount is virtually limitless. The smart move is to put away somewhere around $15.00 per flight hour for just general maintenance reserves in addition to what you spend on the annual inspection itself.

I think that covers most of it. Like I said, still cheaper than renting nowadays if you're going to put any reasonable amount of time on it. But it's not a poor man's hobby. Be ready for it. Don't get fooled into thinking you can afford it just by looking at what the monthly loan payment is going to be. That's the smallest part of your worries.

 

[killbilly]

Yep. Having just gone through this process, here is a good list of expenses that you can expect if buying:

1. Pre-buy: You'll probably want to do an entire annual unless the plane is just a few months out of annual. Even then, though, a non-annual pre-buy inspection is still pricey. The plane I bought is just three months out of annual, but it cost me $950 for the pre-buy.

2. Title search: Your finance company will require a title search to be run. Expect $150-$200.

3. Down payment: The best you're going to do is 15% down. Some finance companies want 20%. That said, you can finance it over 15-20 years, so monthly payments won't be bad. But you have to have the cash up front for the down payment. No exceptions on that.

4. Insurance: Your experience level is going to heavily affect this. I got dirt cheap insurance because of my copious amounts of turbine and complex time and my ATP with a couple of type ratings, but I'm still paying $800/year. The average hobby pilot could expect to at least double that for the same plane.

5. Tie down or hangar: Tie downs are cheap. I got one for $56/mo. Hangars are hard to come by in some places (22 people deep on the waiting list at my airport), and they're expensive as hell. Expect $250-$600/mo for hangar space, depending on where you live.

6. Engine reserve: Engines need to be overhauled at around 2,000 hours. You can sometimes stretch them longer, but I wouldn't. An engine overhaul will cost anywhere from $15k-$35k, depending on the engine. That means you need to plan on putting $7.50-$17.50 per hour into a savings account so that you have the money when the overhaul comes due.

7. Prop overhaul: All props need an overhaul eventually, but if you've got a constant speed prop, you're going to want to do this at least every 2,500 hours. These prices vary, but plan on putting somewhere around $5.00 per hour into savings for this.

8. Oil: Again, it varies, but plan on somewhere around $2.00 per hour.

9. Annual inspection: Depending on how complex the plane, anywhere from $900 to $3,000 for a piston single, and that doesn't include any work that needs to be done. That's just the inspection and paperwork. If work needs to be done, the amount is virtually limitless. The smart move is to put away somewhere around $15.00 per flight hour for just general maintenance reserves in addition to what you spend on the annual inspection itself.

I think that covers most of it. Like I said, still cheaper than renting nowadays if you're going to put any reasonable amount of time on it. But it's not a poor man's hobby. Be ready for it. Don't get fooled into thinking you can afford it just by looking at what the monthly loan payment is going to be. That's the smallest part of your worries.

Sage advice.

Someone told me once to think of it as renting from yourself, or your bank, instead of renting from an FBO - pay your hourly rate accordingly.

 

[Patrick]

If you can swing it to purchase a decent aircraft, and get a little lucky that nothing major blows up during your tenure, and then sell it when you're all done, you have the potential to come out ahead.

 

[BEEF SUPREME]

I fly about 20-30 hours a month.

 

[BaronPete]

Does anyone have an excel spreadsheet already set up that they can share for the rent vs. own calculations?

 

[milleR]

Does anyone have an excel spreadsheet already set up that they can share for the rent vs. own calculations?

This is a good start.

http://www.myplane.us/index.php?option=com_wrapper&view=wrapper&Itemid=11