Plane & Pilot
Monday, October 1, 2007

$500 Per Month?

You can own an airplane on a budget

First Problem
Most aviation banks have a $25,000 to $50,000 minimum on airplane loans. This is largely due to the clerical expense in setting up the loan, the collection costs and overall risks. It’s just hard for a lender in Ohio to keep up with a $20,000 loan in Nebraska. So, how are we going to get to first base if none of the major airplane banks will do our deal?

Here’s a hint: The best outlet for a $20,000 airplane loan is Bank of America or Washington Mutual. Right now, they’ll give you a second mortgage on your home or condo for $20,000, subject to your reasonably decent credit.

Flying without insurance isn’t smart. you’re risking your entire investment, plus your net worth, on trying to save a very little amount of money.

At this writing, Bank of America was quoting approximately 8.74%, or a modest 0.74% over prime. This loan is based on auto-debit of your Bank of America account (saves billing and collection expense). While it’s a second mortgage on your home, they don’t care if you spend it on an airplane. The paperwork isn’t too bad for a $20,000 second mortgage, and most any branch with a home mortgage department should be able to handle it.

Relief. Now We’ve Got The Money. What’s Next?
The next step is insurance. Flying without insurance isn’t smart. You’re risking your entire investment, plus your net worth, on trying to save a very little amount of money. According to Dave Monaco at Southwest Aviation Insurance in Scottsdale, Ariz., full coverage on a modern $20,000 airplane, for a pilot with no accidents or violations, will run approximately $70 per month.

500 per monthIf the budget is tight, it’s not the time to be risky. Things happen. By buying insurance, you’re assuring yourself that, in most cases, if something does go awry, you won’t be out of the flying game. There will be money to fix the bird or replace it.

It’s coming together. So far, we’ve spent $215 per month. What about maintenance? Could this blow our budget?

Every airplane must have an FAA-mandated annual inspection once a year. This is the law, as well as good common sense. Annual inspections can be the trickiest part of our budget since you can’t totally predict what will break on an airplane. Since it’s safety-related, we won’t cut corners in this area, but we can be as wise and practical as possible.

Common logic tells us to find a capable mechanic who knows our type of airplane and is, perhaps, off the beaten path and away from big-city overhead costs. Big-time shops that work on pricey jets and turboprops should be avoided for our $20,000 airplane if we’re to stay within budget. Many mechanics located away from the stress of high-overhead areas will offer, or allow, an “owner-assisted” annual inspection. This is where the owner can do the mundane things, like opening inspection plates, taking the cowling off and generally “prepping” the airplane for the mechanic to have a look.


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