Plane & Pilot
Tuesday, August 24, 2010

Buying Your First Airplane

Navigating the purchase maze

Insurance is in two forms: liability and hull. The hull insurance will be a percentage of the value of the airplane, but it will also vary depending on the complexity, type of airplane and the flight time of the pilot and his or her experience in this specific type (sometimes specific make and model) of airplane. A retractable-gear airplane will always be more expensive. Same for birds with a tailwheel or two engines. Those raise the possibility of pilot-induced error, so they charge more. Many pilots don’t carry hull insurance, but liability insurance is a “must-have” and it’s not terribly expensive.

Some maintenance, such as the annual inspection, can’t be avoided. Here you spend money whether you fly it or not. The exact cost will depend on the size and complexity of the airplane, but you won’t get it for less than $1,000, and it may run four times that. Other maintenance is the direct result of using it. The good news is that some normal maintenance can legally be done by the owners, and items like changing oil and tires are included. However, don’t think that not flying the airplane will save you money. If you don’t fly it at all, it will cost you much more in the future because the engine deteriorates whether it’s running or not. Unless properly pickled, long periods of inactivity shorten the engine’s life considerably.

Spreading The Financial Hit
Because of the cost of airplane ownership and the small number of hours they’re generally used per year, we’re now seeing the rise of organizations that specialize in setting up shared ownership.

• Partnerships. If the number of partners exceeds a given number, five being the most common, insurance companies begin to treat them as a club, and the rates increase. Regardless, pick your partners based on financial responsibility, attitude (don’t partner with show-offs) and personality.

• Limited-liability corporations. Many partnerships, and individuals for that matter, put their airplanes in LLCs to isolate the liability.

• Fractional ownership. A fractional ownership is different than a partnership. Think of it as a timeshare where you own part of an airplane, but you work through a managing agency that takes care of the maintenance, insurance and all the other stuff that no one wants to think about. These started out with jets and turbines but are becoming very popular for single-engine birds because it’s so simple: You pay a buy-in fee, a maintenance fee and an hourly rate. That’s it!

Keep Resale In Mind
Thinking ahead to the day you’ll sell the airplane isn’t negative thinking. It’s another form of smart asset management. Some airplanes hold their value and have done so for generations. For instance, there’s always a hot market for clean Skylanes and Bonanzas. Other airplane types don’t fair as well, and this often is reflected in their purchase price. So, don’t buy an “off brand” just because it’s cheap, unless you’re willing to take a bigger hit when you resell. Also, when buying, realize that well-equipped aircraft sell faster than those with barebones panels.

Where To Look
When you’re talking new versus used aircraft, some of the same sales channels apply because new aircraft dealers advertise in the same outlets, especially Trade-A-Plane, Controller and a myriad of other sales outlets. Most of these can be found by Googling “new aircraft sales” or the name of the specific dealer (“Cessna”). And don’t overlook your local airport. If they don’t have a dealer, they’ll know where to find one for you.

In the end, airplane-buying decisions almost always have a modicum of emotion involved. However, by doing your research and building your spreadsheets, at least your emotions will be well informed.

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