lease back financing 5, 10, 20 years

[R.Hubbell]

Calling all owners that leaseback a plane to a club or FBO or ??

I have found that financers offer different loans depending on
the who uses the plane. For a club they want 10 years or less
but for private they will finance up to 20 years. Maybe I just need
to keep looking. I don't quite undertand why they would care as
long as they get paid.

So if you are leasing a plane back what kinds of loans were you
able to get?


The 20 year loans are ideal for so many reasons.

R. Hubbell

[Dude]

I got 20 from MBNA on a new plane. They do did ask if you plan to use a
leaseback.

The reason they are asking is that when Cessna unloaded a lot of planes
cheaply a year or two ago, many skyhawk owners found out that they were
upside down in their leaseback planes. At the same time hours were dropping
and some of them walked away from the deal because they were really broke,
or just mad. The finance company gets stuck.

Those that ask usually want no more than a 10 year note on a leaseback,
which you MAY be able to negotiate up with a larger down payment. Or you
can fib, just make sure that there is no language in the contract to prevent
you from later deciding to put the plane on leaseback.

Shop around, it took me two months, but I got the loan I wanted.


"R.Hubbell" > wrote in message
...
> Calling all owners that leaseback a plane to a club or FBO or ??
>
> I have found that financers offer different loans depending on
> the who uses the plane. For a club they want 10 years or less
> but for private they will finance up to 20 years. Maybe I just need
> to keep looking. I don't quite undertand why they would care as
> long as they get paid.
>
> So if you are leasing a plane back what kinds of loans were you
> able to get?
>
>
> The 20 year loans are ideal for so many reasons.
>
> R. Hubbell

[Ron Natalie]

"Dude" > wrote in message ...

> Those that ask usually want no more than a 10 year note on a leaseback,
> which you MAY be able to negotiate up with a larger down payment. Or you
> can fib, just make sure that there is no language in the contract to prevent
> you from later deciding to put the plane on leaseback.
>
Believe me, MBNA specifically places that restriction in the loan documents.
I had to get a "consent to leaseback" from them when I had my plane on leaseback.

Of course, MBNA seems to have gone down hill, following the fine tendency
for any AOPA recommended service to be a good deal for nobody but AOPA.
They so screwed up my account and ****ed off both my mechanic and insurance
agent...that it was easier for me to just pay off the remainder of the loan than
to deal with the arrogant asshole there.

[Dude]

They have the documents available on line, so you can check.


"Ron Natalie" > wrote in message
. ..
>
> "Dude" > wrote in message
...
>
> > Those that ask usually want no more than a 10 year note on a leaseback,
> > which you MAY be able to negotiate up with a larger down payment. Or
you
> > can fib, just make sure that there is no language in the contract to
prevent
> > you from later deciding to put the plane on leaseback.
> >
> Believe me, MBNA specifically places that restriction in the loan
documents.
> I had to get a "consent to leaseback" from them when I had my plane on
leaseback.
>
> Of course, MBNA seems to have gone down hill, following the fine tendency
> for any AOPA recommended service to be a good deal for nobody but AOPA.
> They so screwed up my account and ****ed off both my mechanic and
insurance
> agent...that it was easier for me to just pay off the remainder of the
loan than
> to deal with the arrogant asshole there.
>

[R.Hubbell]

On Fri, 06 Feb 2004 17:04:08 GMT "Dude" > wrote:

> I got 20 from MBNA on a new plane. They do did ask if you plan to use a
> leaseback.
>
> The reason they are asking is that when Cessna unloaded a lot of planes
> cheaply a year or two ago, many skyhawk owners found out that they were
> upside down in their leaseback planes. At the same time hours were dropping
> and some of them walked away from the deal because they were really broke,
> or just mad. The finance company gets stuck.
>


There must be more to it then just that. But I could understand how
people would walk away from a leaseback that's underwater but it
seems it's most likely to happen in the first 10 years
rather than the last. And with a cheaper monthly payment on a
20 year note it seems the chances of going inverted on
a leaseback would be less common. Plane doesn't have to fly as much
to cover the monthly.


> Those that ask usually want no more than a 10 year note on a leaseback,
> which you MAY be able to negotiate up with a larger down payment. Or you
> can fib, just make sure that there is no language in the contract to prevent
> you from later deciding to put the plane on leaseback.


Increasing the down payment sounds like a good option.


>
> Shop around, it took me two months, but I got the loan I wanted.


Yes will do that, I think it's a borrowers market.

Tanks for sharing your experience.

R. Hubbell


>
>
> "R.Hubbell" > wrote in message
> ...
> > Calling all owners that leaseback a plane to a club or FBO or ??
> >
> > I have found that financers offer different loans depending on
> > the who uses the plane. For a club they want 10 years or less
> > but for private they will finance up to 20 years. Maybe I just need
> > to keep looking. I don't quite undertand why they would care as
> > long as they get paid.
> >
> > So if you are leasing a plane back what kinds of loans were you
> > able to get?
> >
> >
> > The 20 year loans are ideal for so many reasons.
> >
> > R. Hubbell
>
>

[R.Hubbell]

On Fri, 6 Feb 2004 14:23:33 -0500 "Ron Natalie" > wrote:

>
> "Dude" > wrote in message ...
>
> > Those that ask usually want no more than a 10 year note on a leaseback,
> > which you MAY be able to negotiate up with a larger down payment. Or you
> > can fib, just make sure that there is no language in the contract to prevent
> > you from later deciding to put the plane on leaseback.
> >
> Believe me, MBNA specifically places that restriction in the loan documents.
> I had to get a "consent to leaseback" from them when I had my plane on leaseback.

So they limited you to a 10 year note?


>
> Of course, MBNA seems to have gone down hill, following the fine tendency
> for any AOPA recommended service to be a good deal for nobody but AOPA.
> They so screwed up my account and ****ed off both my mechanic and insurance
> agent...that it was easier for me to just pay off the remainder of the loan than
> to deal with the arrogant asshole there.
>

what other services have they screwed up?


R. Hubbell

[G.R. Patterson III]

Ron Natalie wrote:
>
> They so screwed up my account and ****ed off both my mechanic and insurance
> agent...that it was easier for me to just pay off the remainder of the loan than
> to deal with the arrogant asshole there.

I just got word that MBNA is taking over my VISA account from my credit union. I'm
not looking forward to it.

George Patterson
Love, n.: A form of temporary insanity afflicting the young. It is curable
either by marriage or by removal of the afflicted from the circumstances
under which he incurred the condition. It is sometimes fatal, but more
often to the physician than to the patient.

[R.Hubbell]

On Sat, 07 Feb 2004 07:24:25 -0500 Saryon > wrote:

> On Fri, 6 Feb 2004 19:07:34 -0800, "R.Hubbell"
> > wrote:
>
>
> >> Of course, MBNA seems to have gone down hill, following the fine tendency
> >> for any AOPA recommended service to be a good deal for nobody but AOPA.
> >> They so screwed up my account and ****ed off both my mechanic and insurance
> >> agent...that it was easier for me to just pay off the remainder of the loan than
> >> to deal with the arrogant asshole there.
> >>
> >
> >what other services have they screwed up?
>
> One time I knew I was moving before the next bill print (I had just
> received my bill and was moving the next week). I called them up and
> gave them my new address. Called back 5 days later to make sure the
> computer had my new address. Never got my next month's bill at either
> my old address (had mail forwarded) or my new address. Called them up
> and got mailing address and amount due - mailed it in, and the check
> got cashed. Got the bill after that one, mailed to my old address and
> now showing my account 30 days late. They also reported me late to
> the credit bureaus and refused to fix it, even though it was clearly
> their fault, and I had unequivocable proof that they had in fact been
> paid, on time, even without a statement. I will never do business
> with MBNA or get store financing through any company that uses them as
> their lender.
>


Well this kind of stuff happens at all banks, sometimes it behooves
thme to be less than efficient. I have had banks play all kinds
of games. Often they attribute the problems do to just mistakes
on the part of their employees. It's amazing how the mistakes
always seem to go in their favor.


R. Hubbell

[Ron Natalie]

"R.Hubbell" > wrote in message ...
> > Believe me, MBNA specifically places that restriction in the loan documents.
> > I had to get a "consent to leaseback" from them when I had my plane on leaseback.
>
> So they limited you to a 10 year note?
>

Don't know. I only asked for a ten year note.

> what other services have they screwed up?
>
I haven't found any of their allied services to be a good deal: insurance, car rental
discounts, etc...

[Ron Natalie]

"R.Hubbell" > wrote in message ...
>
> Well this kind of stuff happens at all banks, sometimes it behooves
> thme to be less than efficient. I have had banks play all kinds
> of games. Often they attribute the problems do to just mistakes
> on the part of their employees. It's amazing how the mistakes
> always seem to go in their favor.

I had set up the thing to be automatic payment from my checking account.
Twice this managed to get hosed up on the MBNA end. The latter time some
goofy charge of under a dollar kept getting propagated from month to month.
I called numerous times to inquire as well as buttonholing the MBNA reps at
Oshkosh and the AOPA expos several times to complain. Never once got
a promised answer.

The last straw was when I had a damage claim on the plane. As is typical,
the insurance company made the check out jointly to me and MBNA as the
lienholder. Since the work had already been performed, I asked them to
just endorse the check back over to me (I've had similar situations with
claims on homeowners policies, etc.... it's never ever been a problem). Well
MBNA wants proof the work was done. I fax them the bills, they call
the shop, the shop owner (who is the most laid back guy I've ever met) says
the loan guy is an arrogant jerk. This goes round and round. Finally, I note
that the balance on the loan is LESS than the check they're sitting on. Tell them
to just use the check to pay it off.

Now get this, of course, I didn't endorse the check so they can't cash it. So
they mail it to me (but they've already endorsed it, so I could have just as easily
cashed the thing). I sent it back anyhow. Still took several calls to get the
payoff handled and the balance sent back to me.

This is typical of MBNA (also had some fun with their credit card department).
If everything goes fine, it's a good deal. Even Jeannette Ving and the folks in
the acquisition department are good people. However, if anything goes wrong
their customer service people are a bunch of arrogant idiots and you're lucky
if anything gets straightened out.

[VideoGuy]

"Ron Natalie" > wrote in message
. ..

> Of course, MBNA seems to have gone down hill, following the fine tendency
> for any AOPA recommended service to be a good deal for nobody but AOPA.
> They so screwed up my account and ****ed off both my mechanic and
insurance
> agent...that it was easier for me to just pay off the remainder of the
loan than
> to deal with the arrogant asshole there.
>

I'd be wiling to go out on a limb and offer the opinion that nearly all of
the credit companies have become more difficult. Don't put the blame solely
on AOPA. As the interest rates the creditors pay to the Fed to borrow money
has been very low for quite a few years, the overall interest rates paid by
the public has either held fast, or risen. The only notable exception to
this seems to be home loans; and the money there seems to be in refinancing
fees rather than interest. Possibly this is because the majority of home
loans do not run out the term. They are either refinanced by the original
borrower, or the home is sold and the loan is paid off early.

MBNA and CitiBank both seem to be pretty poor at customer "service" and damn
good at assessing late fees and punitive interest rates for someone who's
payment is even ONE day past their deadline. I STRONGLY suspect that there
is a delay in processing payments just to push more people into the late
category. My suspicions are based on USPS delivery receipts and the
tracking of delivery dates and times. I was told by one CitiBank customer
"service" employee that payments received after 10AM on a given BUSINESS day
are credited the NEXT business day. However, interest is calculated on a
DAILY basis; so, a FRIDAY noon receipt of a payment is credited on Monday
and is therefore THREE days late! Pretty clever, don't you think? MBNA
seems to be operating on many of the same principals. I have heard, but
been unable to verify that CitiBank and MBNA are actually subsidiaries of
the same corporation. My CitiBank account is closed, and the MBNA isn't
used much either. My other Mastercard has just been transferred (hijacked?)
by Citibank, so I guess I'll have to drop that one into the shreadder too.

If things don't change dramatically, I don't know how I'm going to be able
to secure financing in a year or so for ANY kind of modest, 30-year old
plane. If I have to wait until I can pay cash for a plane, I'll be too old
to learn to fly it! (sigh) <:-((

Gary Kasten

[G.R. Patterson III]

VideoGuy wrote:
>
> If things don't change dramatically, I don't know how I'm going to be able
> to secure financing in a year or so for ANY kind of modest, 30-year old
> plane.

May be a long shot, but if you're a credit union member, you may be able to finance
through them. I bought both my planes using loans from credit unions. One of those
CUs doesn't finance aircraft anymore, though.

George Patterson
Love, n.: A form of temporary insanity afflicting the young. It is curable
either by marriage or by removal of the afflicted from the circumstances
under which he incurred the condition. It is sometimes fatal, but more
often to the physician than to the patient.

[Mike Long]

Jet Dollars will do 15 years at 4% variable, balloon at 5 years, 10%
down. Their service is good and the owner's a nice guy.

The reason for the shorter amortization term with a leaseback is that
maintenance will usually get too expensive in a leaseback environment
with an older plane. So, it makes sense at some point to trade the
existing aircraft for a new or newer one. If you have a 20 year loan
and decide to do this in 2 or 3 years, you're upside down. At 12-15
years you are in a much better position. This has been especially true
since 2001 with the economy hurting and the resale market just
beginning to rebound.

Consider carefully before doing 20 years with a leaseback - it can be
painful later.

Mike

"R.Hubbell" > wrote in message >...
> Calling all owners that leaseback a plane to a club or FBO or ??
>
> I have found that financers offer different loans depending on
> the who uses the plane. For a club they want 10 years or less
> but for private they will finance up to 20 years. Maybe I just need
> to keep looking. I don't quite undertand why they would care as
> long as they get paid.
>
> So if you are leasing a plane back what kinds of loans were you
> able to get?
>
>
> The 20 year loans are ideal for so many reasons.
>
> R. Hubbell

[R.Hubbell]

On 10 Feb 2004 04:51:58 -0800 (Mike Long) wrote:

> Jet Dollars will do 15 years at 4% variable, balloon at 5 years, 10%

Variable would be dicey right now, looks like rates may go up.
What percentage is the balloon?



> down. Their service is good and the owner's a nice guy.
>
> The reason for the shorter amortization term with a leaseback is that
> maintenance will usually get too expensive in a leaseback environment
> with an older plane. So, it makes sense at some point to trade the
> existing aircraft for a new or newer one. If you have a 20 year loan
> and decide to do this in 2 or 3 years, you're upside down. At 12-15

I'm not sure I'm following you. are you assuming that the plane's value
will depreciate? and then after 2-3 years the amount on the loan is more
than the value of the plane? But with the shorter term loan you've paid
more down more?

> years you are in a much better position. This has been especially true
> since 2001 with the economy hurting and the resale market just
> beginning to rebound.

The resale market looks stagnant to me but I'm only looking at piston singles.

>
> Consider carefully before doing 20 years with a leaseback - it can be
> painful later.

It really depends on how much the plane flies/month. If the plane is in the
air then everything can work out. With $300-400 month payments it's not
a huge burden if something does go foul.

Thanks.

R. Hubbell

>
> Mike
>
> "R.Hubbell" > wrote in message >...
> > Calling all owners that leaseback a plane to a club or FBO or ??
> >
> > I have found that financers offer different loans depending on
> > the who uses the plane. For a club they want 10 years or less
> > but for private they will finance up to 20 years. Maybe I just need
> > to keep looking. I don't quite undertand why they would care as
> > long as they get paid.
> >
> > So if you are leasing a plane back what kinds of loans were you
> > able to get?
> >
> >
> > The 20 year loans are ideal for so many reasons.
> >
> > R. Hubbell

[Mike Long]

"R.Hubbell" > wrote in message news:<20040210203318.10c9d7f7@fstop>...
> On 10 Feb 2004 04:51:58 -0800 (Mike Long) wrote:
>
> > Jet Dollars will do 15 years at 4% variable, balloon at 5 years, 10%
>
> Variable would be dicey right now, looks like rates may go up.
> What percentage is the balloon?

The variable would be unlimited. Ie, if the rates went to 20%, so
would the note. Remember 18%? Ouch. However, one can guess rates will
go up at a reasonable pace.
>
>
>
> > down. Their service is good and the owner's a nice guy.
> >
> > The reason for the shorter amortization term with a leaseback is that
> > maintenance will usually get too expensive in a leaseback environment
> > with an older plane. So, it makes sense at some point to trade the
> > existing aircraft for a new or newer one. If you have a 20 year loan
> > and decide to do this in 2 or 3 years, you're upside down. At 12-15
>
> I'm not sure I'm following you. are you assuming that the plane's value
> will depreciate? and then after 2-3 years the amount on the loan is more
> than the value of the plane? But with the shorter term loan you've paid
> more down more?

The amount owed after 2 or 3 years is greater on a 20 year note than
on a 12 or 15 year note (naturally, and I'm sure you know this). The
new aircraft will depreciate until its value will begin to rise. The
used aircraft will depreciate if hours accumulated are greater than
the average - which they would on a leaseback. So, you have a
combination of depreciating value, no equity paid (because of the long
term loan) and the need to renew the aircraft more quickly than others
because of the leaseback - because maintenance increases as the
aircraft ages to the point that you cannot make money.

A shorter note and good revenues are your only defenses. You put some
money in your pocket from 60-65 hours hobbs and your higher payment
brings the payoff amount down. Add the tax advantages and it comes out
okay. You can do it with a 20 year note if you have the will power to
make extra principal payments or sock some money away for resale time.

>
> > years you are in a much better position. This has been especially true
> > since 2001 with the economy hurting and the resale market just
> > beginning to rebound.
>
> The resale market looks stagnant to me but I'm only looking at piston singles.

I'm only paying attention to singles also. There is good activity on
172Sp's and 182's but, OTOH, 182's are almost always stable. For
prices to rise, aircraft need to sell even more and the numbers of
good airplanes reduce. We're not there yet but they are selling.

>
> >
> > Consider carefully before doing 20 years with a leaseback - it can be
> > painful later.
>
> It really depends on how much the plane flies/month. If the plane is in the
> air then everything can work out. With $300-400 month payments it's not
> a huge burden if something does go foul.

I confess the formula I use is for new aircraft where payments are
much higher although the theory is still right. The only thing about a
used aircraft on leaseback is that maintenance can keep you from
having a postive cash flow. Even a good airplane will break and it
will break more often at 60-65 hours a month. But, yes, you are right.
If it flies enough, you will have plenty of money to take care of the
equity shortage later.

With new, I simply feel like you're going to make a little each month
after all expenses, including payments, is made. Then, add the tax
advantages. And then consider you own and are flying a new aircraft
for free - maybe even making a little. And there are schools where the
owners make some real money (real money in aviation is usually less
than your day job <g>).

Thanks,

Mike

[R.Hubbell]

On 11 Feb 2004 04:50:47 -0800 (Mike Long) wrote:

> "R.Hubbell" > wrote in message news:<20040210203318.10c9d7f7@fstop>...
> > On 10 Feb 2004 04:51:58 -0800 (Mike Long) wrote:
> >
> > > Jet Dollars will do 15 years at 4% variable, balloon at 5 years, 10%
> >
> > Variable would be dicey right now, looks like rates may go up.
> > What percentage is the balloon?
>
> The variable would be unlimited. Ie, if the rates went to 20%, so
> would the note. Remember 18%? Ouch. However, one can guess rates will
> go up at a reasonable pace.


Sure I understand what a variable rate is, what's the balloon payment
at 5 years?

> >
> >
> >
> > > down. Their service is good and the owner's a nice guy.
> > >
> > > The reason for the shorter amortization term with a leaseback is that
> > > maintenance will usually get too expensive in a leaseback environment
> > > with an older plane. So, it makes sense at some point to trade the
> > > existing aircraft for a new or newer one. If you have a 20 year loan
> > > and decide to do this in 2 or 3 years, you're upside down. At 12-15
> >
> > I'm not sure I'm following you. are you assuming that the plane's value
> > will depreciate? and then after 2-3 years the amount on the loan is more
> > than the value of the plane? But with the shorter term loan you've paid
> > more down more?
>
> The amount owed after 2 or 3 years is greater on a 20 year note than
> on a 12 or 15 year note (naturally, and I'm sure you know this). The
> new aircraft will depreciate until its value will begin to rise. The
> used aircraft will depreciate if hours accumulated are greater than
> the average - which they would on a leaseback. So, you have a
> combination of depreciating value, no equity paid (because of the long
> term loan) and the need to renew the aircraft more quickly than others
> because of the leaseback - because maintenance increases as the
> aircraft ages to the point that you cannot make money.

Alright this agrees with my understanding.

>
> A shorter note and good revenues are your only defenses. You put some
> money in your pocket from 60-65 hours hobbs and your higher payment
> brings the payoff amount down. Add the tax advantages and it comes out
> okay. You can do it with a 20 year note if you have the will power to
> make extra principal payments or sock some money away for resale time.

What kind of tax advantages are there in a lease-back??

>
> >
> > > years you are in a much better position. This has been especially true
> > > since 2001 with the economy hurting and the resale market just
> > > beginning to rebound.
> >
> > The resale market looks stagnant to me but I'm only looking at piston singles.
>
> I'm only paying attention to singles also. There is good activity on
> 172Sp's and 182's but, OTOH, 182's are almost always stable. For
> prices to rise, aircraft need to sell even more and the numbers of
> good airplanes reduce. We're not there yet but they are selling.


There's also a lot of pressure coming from new plane purchases too.
I think that has to have an impact on the used-market.
Diamond, Cirrus, Symphony, Lancair, et. al.

>
> >
> > >
> > > Consider carefully before doing 20 years with a leaseback - it can be
> > > painful later.
> >
> > It really depends on how much the plane flies/month. If the plane is in the
> > air then everything can work out. With $300-400 month payments it's not
> > a huge burden if something does go foul.
>
> I confess the formula I use is for new aircraft where payments are
> much higher although the theory is still right. The only thing about a
> used aircraft on leaseback is that maintenance can keep you from
> having a postive cash flow. Even a good airplane will break and it
> will break more often at 60-65 hours a month. But, yes, you are right.
> If it flies enough, you will have plenty of money to take care of the
> equity shortage later.

For a new plane everything is different. But in a busy club it can work.
It is working in a lot of clubs. It has to be managed properly to work
well.



>
> With new, I simply feel like you're going to make a little each month
> after all expenses, including payments, is made. Then, add the tax
> advantages. And then consider you own and are flying a new aircraft
> for free - maybe even making a little. And there are schools where the
> owners make some real money (real money in aviation is usually less
> than your day job <g>).

All good stuff.



Thanks again.


R. Hubbell

>
> Thanks,
>
> Mike

[Dude]

> What kind of tax advantages are there in a lease-back??
>

The main advantage today is bonus depreciatation. If you have a family
income in the 150 plus area, and want to own a new plane, then leasebacks
become a reasonable risk to help you buy the plane. Basically, you can end
up getting a very large tax rebate to then pay off a good chunk of your
loan. I borrowed 150k on my plane, got a 22k rebate (this was under 4th qtr
rule, and withonly 30% bonus. Today you get 50% bonus until Jan1.) By
putting the 22k against my 20 year loan, I effectively have a 15 year loan
with the same payments of a 20. This is why a 20 year loan is really okay.
The key is YOU HAVE TO TAKE ALL YOUR REBATES AND SEND THEM TO THE LIEN
HOLDER! (The guy that taught me this was religious about it, and now so am
I.)

The reason to send them in is in case for some reason you have to sell the
plane, you will not be upside down with the bank or the IRS (due to
recapture).

Also, you want to have 6 months payments in a rainy day fund. You are safer
with a lower down payment, and a rainy day fund than with a higher down
payment (especially at these rates). At these low rates, I would always go
fixed.


> There's also a lot of pressure coming from new plane purchases too.
> I think that has to have an impact on the used-market.
> Diamond, Cirrus, Symphony, Lancair, et. al.
>

The new improvements of glass cockpits and other items plus bonus
depreciation is pushing really hard on the value of planes under 5 years
old. Planes built before the eighties are holding up well considering that
most of them are passing the 25 year mark. I believe you will see them
start to drop significantly, as the hulls age. If you want to fly cheap, go
get an AP certificate. If you are willing to be a mechanic, you will soon
be able to buy planes for the value of the engines and avionics.


>
> For a new plane everything is different. But in a busy club it can work.
> It is working in a lot of clubs. It has to be managed properly to work
> well.
>
>

The reduced outages, greater marketability, and warranty on a new plane can
help it make money. Insurance can be an issue though. The key to a new
plane on leaseback is a plan for what to do after it is 5 years old. Can
you step up, and still have a viable leaseback? Is plane number two not
going to be a leaseback at all? Do you want to leave it in leaseback
indefinitely? Are you planning to take it off the line and replace it?

My original plan was to take it off the line after the first engine rebuild.
I was planning to get a new interior, nice reman engine, and small avionics
upgrade. According to my spreadsheet, I would be able to get the plane
while I was still a student, and reduce my out of pocket costs to the point
that I was getting a new plane and only paying about 60% of the same out of
pocket costs of new without leaseback. That includes the renovation at the
end of the first engine life. So far the plan is only slightly off, which I
blame on a poor choice of FBO.

The new FBO looks to bring in better hours, lower commissions, and do a
better job on repairs and maintenance for about the same price.
Furthermore, I have now found leaseback opportunities that would give the
tax advantages without the high hours, rough student handling, and high
insurance costs. So I may upgrade my plane instead of rebuilding it.

I know people who have made a little money, but I would not count on that.
If you have expectations of reduced costs only, you are more likely to end
up happy.

[Mike Long]

"R.Hubbell" > wrote in message news:<20040211082332.08bd1965@fstop>...
> On 11 Feb 2004 04:50:47 -0800 (Mike Long) wrote:
>
> > "R.Hubbell" > wrote in message news:<20040210203318.10c9d7f7@fstop>...
> > > On 10 Feb 2004 04:51:58 -0800 (Mike Long) wrote:
> > >
> > > > Jet Dollars will do 15 years at 4% variable, balloon at 5 years, 10%
> > >
> > > Variable would be dicey right now, looks like rates may go up.
> > > What percentage is the balloon?
> >
> > The variable would be unlimited. Ie, if the rates went to 20%, so
> > would the note. Remember 18%? Ouch. However, one can guess rates will
> > go up at a reasonable pace.
>
>
> Sure I understand what a variable rate is, what's the balloon payment
> at 5 years?

$128,350 on a $195,200 purchase price
$65,723 ON A $100,000 purchase price

Mike

[R.Hubbell]

On Mon, 9 Feb 2004 10:31:36 -0500 "Ron Natalie" > wrote:

>
> "R.Hubbell" > wrote in message ...
> >
> > Well this kind of stuff happens at all banks, sometimes it behooves
> > thme to be less than efficient. I have had banks play all kinds
> > of games. Often they attribute the problems do to just mistakes
> > on the part of their employees. It's amazing how the mistakes
> > always seem to go in their favor.
>
> I had set up the thing to be automatic payment from my checking account.
> Twice this managed to get hosed up on the MBNA end. The latter time some
> goofy charge of under a dollar kept getting propagated from month to month.
> I called numerous times to inquire as well as buttonholing the MBNA reps at
> Oshkosh and the AOPA expos several times to complain. Never once got
> a promised answer.
>
> The last straw was when I had a damage claim on the plane. As is typical,
> the insurance company made the check out jointly to me and MBNA as the
> lienholder. Since the work had already been performed, I asked them to
> just endorse the check back over to me (I've had similar situations with
> claims on homeowners policies, etc.... it's never ever been a problem). Well
> MBNA wants proof the work was done. I fax them the bills, they call
> the shop, the shop owner (who is the most laid back guy I've ever met) says
> the loan guy is an arrogant jerk. This goes round and round. Finally, I note
> that the balance on the loan is LESS than the check they're sitting on. Tell them
> to just use the check to pay it off.
>
> Now get this, of course, I didn't endorse the check so they can't cash it. So
> they mail it to me (but they've already endorsed it, so I could have just as easily
> cashed the thing). I sent it back anyhow. Still took several calls to get the
> payoff handled and the balance sent back to me.


That doesn't sound like anything like fun. Of course they forget that you spent
lots of time tracking this down and making it all right. I would expect an apology
letter or the like. I will try to steer clear of MBNA.


The odd thing about these kinds of things (I've endured my share of this stuff) is
that other people have only the best experience with them.


>
> This is typical of MBNA (also had some fun with their credit card department).
> If everything goes fine, it's a good deal. Even Jeannette Ving and the folks in
> the acquisition department are good people. However, if anything goes wrong
> their customer service people are a bunch of arrogant idiots and you're lucky
> if anything gets straightened out.
>

Glad to hear it had a happy ending.


R. Hubbell

[R.Hubbell]

On Mon, 9 Feb 2004 11:19:21 -0600 "VideoGuy" <gkasten at brick dot net> wrote:

>
> "Ron Natalie" > wrote in message
> . ..
>
> > Of course, MBNA seems to have gone down hill, following the fine tendency
> > for any AOPA recommended service to be a good deal for nobody but AOPA.
> > They so screwed up my account and ****ed off both my mechanic and
> insurance
> > agent...that it was easier for me to just pay off the remainder of the
> loan than
> > to deal with the arrogant asshole there.
> >
>
> I'd be wiling to go out on a limb and offer the opinion that nearly all of
> the credit companies have become more difficult. Don't put the blame solely
> on AOPA. As the interest rates the creditors pay to the Fed to borrow money
> has been very low for quite a few years, the overall interest rates paid by
> the public has either held fast, or risen. The only notable exception to
> this seems to be home loans; and the money there seems to be in refinancing
> fees rather than interest. Possibly this is because the majority of home
> loans do not run out the term. They are either refinanced by the original
> borrower, or the home is sold and the loan is paid off early.


Credit card rates are high because so many people run up debt and then just
bail on it. The ability to file for bankruptcy is a foundation of our system
but it is abused of course. So credit card debt is risky, hence the higher
rates. Banks manage risk. Everyone manages risk now that I think of it.


>
> MBNA and CitiBank both seem to be pretty poor at customer "service" and damn
> good at assessing late fees and punitive interest rates for someone who's
> payment is even ONE day past their deadline. I STRONGLY suspect that there
> is a delay in processing payments just to push more people into the late
> category. My suspicions are based on USPS delivery receipts and the
> tracking of delivery dates and times. I was told by one CitiBank customer
> "service" employee that payments received after 10AM on a given BUSINESS day
> are credited the NEXT business day. However, interest is calculated on a
> DAILY basis; so, a FRIDAY noon receipt of a payment is credited on Monday
> and is therefore THREE days late! Pretty clever, don't you think? MBNA
> seems to be operating on many of the same principals. I have heard, but
> been unable to verify that CitiBank and MBNA are actually subsidiaries of
> the same corporation. My CitiBank account is closed, and the MBNA isn't
> used much either. My other Mastercard has just been transferred (hijacked?)
> by Citibank, so I guess I'll have to drop that one into the shreadder too.


I have found that local banks or credit unions are much nicer to do business
with. Of course they don't usually offer aircraft financing.

>
> If things don't change dramatically, I don't know how I'm going to be able
> to secure financing in a year or so for ANY kind of modest, 30-year old
> plane. If I have to wait until I can pay cash for a plane, I'll be too old
> to learn to fly it! (sigh) <:-((


A 30 yr. old plane financed over 20 years can give you pretty low monthly
payments. If you plan to be the sole flyer it's not too bad.

BTW you can never be too old to learn to fly!


R. Hubbell

>
> Gary Kasten
>
>

[R.Hubbell]

On Wed, 11 Feb 2004 17:54:57 GMT "Dude" > wrote:

> > What kind of tax advantages are there in a lease-back??
> >
>
> The main advantage today is bonus depreciatation. If you have a family
> income in the 150 plus area, and want to own a new plane, then leasebacks
> become a reasonable risk to help you buy the plane. Basically, you can end
> up getting a very large tax rebate to then pay off a good chunk of your
> loan. I borrowed 150k on my plane, got a 22k rebate (this was under 4th qtr
> rule, and withonly 30% bonus. Today you get 50% bonus until Jan1.) By
> putting the 22k against my 20 year loan, I effectively have a 15 year loan
> with the same payments of a 20. This is why a 20 year loan is really okay.
> The key is YOU HAVE TO TAKE ALL YOUR REBATES AND SEND THEM TO THE LIEN
> HOLDER! (The guy that taught me this was religious about it, and now so am
> I.)


Not sure I followed all this so I guess I will have to look into it some
more.


>
> The reason to send them in is in case for some reason you have to sell the
> plane, you will not be upside down with the bank or the IRS (due to
> recapture).
>
> Also, you want to have 6 months payments in a rainy day fund. You are safer
> with a lower down payment, and a rainy day fund than with a higher down
> payment (especially at these rates). At these low rates, I would always go
> fixed.


Yes fixed is less to think about.

>
>
> > There's also a lot of pressure coming from new plane purchases too.
> > I think that has to have an impact on the used-market.
> > Diamond, Cirrus, Symphony, Lancair, et. al.
> >
>
> The new improvements of glass cockpits and other items plus bonus
> depreciation is pushing really hard on the value of planes under 5 years
> old. Planes built before the eighties are holding up well considering that
> most of them are passing the 25 year mark. I believe you will see them
> start to drop significantly, as the hulls age. If you want to fly cheap, go
> get an AP certificate. If you are willing to be a mechanic, you will soon
> be able to buy planes for the value of the engines and avionics.


I've thought of getting an AP but it's not likely to happen in this lifetime.
But possibly. What's it take to get one these days?


>
>
> >
> > For a new plane everything is different. But in a busy club it can work.
> > It is working in a lot of clubs. It has to be managed properly to work
> > well.
> >
> >
>
> The reduced outages, greater marketability, and warranty on a new plane can
> help it make money. Insurance can be an issue though. The key to a new
> plane on leaseback is a plan for what to do after it is 5 years old. Can
> you step up, and still have a viable leaseback? Is plane number two not
> going to be a leaseback at all? Do you want to leave it in leaseback
> indefinitely? Are you planning to take it off the line and replace it?

All good stuff. A couple of thoughts. Some new planes require more time
to be proficient than others. The Cirrus comes to mind. High-performance,
glass cockpit (lots of features in those new devices), the chute. So there
is some impediment in the form of time/money for getting checked out and
that could limit the uptake. As for what to do after 5 years I would think
that the situation would dictate what to do. If it's in the air and paying
for itself let it ride.


>
> My original plan was to take it off the line after the first engine rebuild.
> I was planning to get a new interior, nice reman engine, and small avionics
> upgrade. According to my spreadsheet, I would be able to get the plane
> while I was still a student, and reduce my out of pocket costs to the point
> that I was getting a new plane and only paying about 60% of the same out of
> pocket costs of new without leaseback. That includes the renovation at the
> end of the first engine life. So far the plan is only slightly off, which I
> blame on a poor choice of FBO.


I think a club with a couple of good CFIs and some good members is the best
way to do the leaseback. At least in my case.

>
> The new FBO looks to bring in better hours, lower commissions, and do a
> better job on repairs and maintenance for about the same price.
> Furthermore, I have now found leaseback opportunities that would give the
> tax advantages without the high hours, rough student handling, and high
> insurance costs. So I may upgrade my plane instead of rebuilding it.

Good luck.

>
> I know people who have made a little money, but I would not count on that.
> If you have expectations of reduced costs only, you are more likely to end
> up happy.


Staying out of the red is good enough. And flying it too!

Thanks.

R. Hubbell

>
>
>

[R.Hubbell]

On 11 Feb 2004 18:39:59 -0800 (Mike Long) wrote:

> "R.Hubbell" > wrote in message news:<20040211082332.08bd1965@fstop>...
> > On 11 Feb 2004 04:50:47 -0800 (Mike Long) wrote:
> >
> > > "R.Hubbell" > wrote in message news:<20040210203318.10c9d7f7@fstop>...
> > > > On 10 Feb 2004 04:51:58 -0800 (Mike Long) wrote:
> > > >
> > > > > Jet Dollars will do 15 years at 4% variable, balloon at 5 years, 10%
> > > >
> > > > Variable would be dicey right now, looks like rates may go up.
> > > > What percentage is the balloon?
> > >
> > > The variable would be unlimited. Ie, if the rates went to 20%, so
> > > would the note. Remember 18%? Ouch. However, one can guess rates will
> > > go up at a reasonable pace.
> >
> >
> > Sure I understand what a variable rate is, what's the balloon payment
> > at 5 years?
>
> $128,350 on a $195,200 purchase price
> $65,723 ON A $100,000 purchase price

Ok, well that sure prevents going inverted on the loan. Or at least
it lessens the likelihood greatly.


R. Hubbell

>
> Mike

[Ron Natalie]

"R.Hubbell" > wrote in message news:20040211203532.7d5b8a33@fstop...
> The odd thing about these kinds of things (I've endured my share of this stuff) is
> that other people have only the best experience with them.
>
Well, if you never had to deal with customer support, you'd think they were fine.
They handled the purchase details just fine (I mean, it took me like two phone calls
and a few minutes to get the loan). If I'd not tried to setup an automatic payment
nor had the insurance claim, I would probably have assumed they were peachy.

[Dude]

> > The main advantage today is bonus depreciatation. If you have a family
> > income in the 150 plus area, and want to own a new plane, then
leasebacks
> > become a reasonable risk to help you buy the plane. Basically, you can
end
> > up getting a very large tax rebate to then pay off a good chunk of your
> > loan. I borrowed 150k on my plane, got a 22k rebate (this was under 4th
qtr
> > rule, and withonly 30% bonus. Today you get 50% bonus until Jan1.) By
> > putting the 22k against my 20 year loan, I effectively have a 15 year
loan
> > with the same payments of a 20. This is why a 20 year loan is really
okay.
> > The key is YOU HAVE TO TAKE ALL YOUR REBATES AND SEND THEM TO THE LIEN
> > HOLDER! (The guy that taught me this was religious about it, and now so
am
> > I.)
>
>
> Not sure I followed all this so I guess I will have to look into it some
> more.
>

Talk to a new plane salesman, or tax accountant for more info. Its a great
time to be buying.


> >
> > > There's also a lot of pressure coming from new plane purchases too.
> > > I think that has to have an impact on the used-market.
> > > Diamond, Cirrus, Symphony, Lancair, et. al.
> > >
> >
> > The new improvements of glass cockpits and other items plus bonus
> > depreciation is pushing really hard on the value of planes under 5 years
> > old. Planes built before the eighties are holding up well considering
that
> > most of them are passing the 25 year mark. I believe you will see them
> > start to drop significantly, as the hulls age. If you want to fly cheap,
go
> > get an AP certificate. If you are willing to be a mechanic, you will
soon
> > be able to buy planes for the value of the engines and avionics.
>
>
> I've thought of getting an AP but it's not likely to happen in this
lifetime.
> But possibly. What's it take to get one these days?
>

Its more time than money, might be a good question for a new thread. I am
making good money, so my time is too valuable right now. Things could
always change though. Many owners find a friendly AP to sign to supervise
and sign off on their work as well, but thats usually on simple stuff, not
renovation.


>
> >
> >
> > >
> > > For a new plane everything is different. But in a busy club it can
work.
> > > It is working in a lot of clubs. It has to be managed properly to
work
> > > well.
> > >
> > >
> >
> > The reduced outages, greater marketability, and warranty on a new plane
can
> > help it make money. Insurance can be an issue though. The key to a new
> > plane on leaseback is a plan for what to do after it is 5 years old.
Can
> > you step up, and still have a viable leaseback? Is plane number two not
> > going to be a leaseback at all? Do you want to leave it in leaseback
> > indefinitely? Are you planning to take it off the line and replace it?
>
> All good stuff. A couple of thoughts. Some new planes require more time
> to be proficient than others. The Cirrus comes to mind.
High-performance,
> glass cockpit (lots of features in those new devices), the chute. So
there
> is some impediment in the form of time/money for getting checked out and
> that could limit the uptake.

I would check insurance rates with the fleet insurer before buying, but i
doubt it will make sense to go with Cirrus due to rates. Diamonds are easy
check outs, but rates vary from as good as Cessna or Piper to a bit higher
depending on insurance companies' like or dislike of composites.


As for what to do after 5 years I would think
> that the situation would dictate what to do. If it's in the air and
paying
> for itself let it ride.
>

That's a choice, but you may get tired of sharing too. :)


> >
> > I know people who have made a little money, but I would not count on
that.
> > If you have expectations of reduced costs only, you are more likely to
end
> > up happy.
>
>
> Staying out of the red is good enough. And flying it too!
>
> Thanks.
>
> R. Hubbell
>
> >
> >
> >

[Ron Natalie]

"Dude" > wrote in message ...
> > > The key is YOU HAVE TO TAKE ALL YOUR REBATES AND SEND THEM TO THE LIEN
> > > HOLDER! (The guy that taught me this was religious about it, and now so
> am
> > > I.)
> >
> >
> > Not sure I followed all this so I guess I will have to look into it some
> > more.
> >
>
> Talk to a new plane salesman, or tax accountant for more info. Its a great
> time to be buying.
>
It's hard to follow because it is garbled. It's his opinion of what you should do, rather
than what is actually required by either the law or the lender. The issue is much the
same with any "artificial" depreciation. You can end up with more tax liability on a
sale than you have in equity. You're not really "upside down" as far as the lender is
concerned. If you default, they can take the plane and it is still worth more than what
you owe.

[R.Hubbell]

On Thu, 12 Feb 2004 12:10:52 -0500 "Ron Natalie" > wrote:

>
> "R.Hubbell" > wrote in message news:20040211203532.7d5b8a33@fstop...
> > The odd thing about these kinds of things (I've endured my share of this stuff) is
> > that other people have only the best experience with them.
> >
> Well, if you never had to deal with customer support, you'd think they were fine.
> They handled the purchase details just fine (I mean, it took me like two phone calls
> and a few minutes to get the loan). If I'd not tried to setup an automatic payment


Like with a home equity loan they are pretty easy to get but it's all down
hill from there. $500 to close them early, etc.

> nor had the insurance claim, I would probably have assumed they were peachy.
>


Any deviation from the standard stuff probably threw them for a loop.


R. Hubbell

[R.Hubbell]

On Thu, 12 Feb 2004 20:05:23 GMT "Dude" > wrote:

> > > The main advantage today is bonus depreciatation. If you have a family
> > > income in the 150 plus area, and want to own a new plane, then
> leasebacks
> > > become a reasonable risk to help you buy the plane. Basically, you can
> end
> > > up getting a very large tax rebate to then pay off a good chunk of your
> > > loan. I borrowed 150k on my plane, got a 22k rebate (this was under 4th
> qtr
> > > rule, and withonly 30% bonus. Today you get 50% bonus until Jan1.) By
> > > putting the 22k against my 20 year loan, I effectively have a 15 year
> loan
> > > with the same payments of a 20. This is why a 20 year loan is really
> okay.
> > > The key is YOU HAVE TO TAKE ALL YOUR REBATES AND SEND THEM TO THE LIEN
> > > HOLDER! (The guy that taught me this was religious about it, and now so
> am
> > > I.)
> >
> >
> > Not sure I followed all this so I guess I will have to look into it some
> > more.
> >
>
> Talk to a new plane salesman, or tax accountant for more info. Its a great
> time to be buying.


I will probably talk to an accountant, yes. The tax code is getting crazier
by the minute. I just read a little bit about AMT. Scary stuff.
It's now referred to as the "stealth tax".


>
>
> > >
> > > > There's also a lot of pressure coming from new plane purchases too.
> > > > I think that has to have an impact on the used-market.
> > > > Diamond, Cirrus, Symphony, Lancair, et. al.
> > > >
> > >
> > > The new improvements of glass cockpits and other items plus bonus
> > > depreciation is pushing really hard on the value of planes under 5 years
> > > old. Planes built before the eighties are holding up well considering
> that
> > > most of them are passing the 25 year mark. I believe you will see them
> > > start to drop significantly, as the hulls age. If you want to fly cheap,
> go
> > > get an AP certificate. If you are willing to be a mechanic, you will
> soon
> > > be able to buy planes for the value of the engines and avionics.
> >
> >
> > I've thought of getting an AP but it's not likely to happen in this
> lifetime.
> > But possibly. What's it take to get one these days?
> >
>
> Its more time than money, might be a good question for a new thread. I am

That's what I thought. Maybe down the road it'll make more sense. It would
only be to for personal reasons. I have no intention of doing that for a living.



> making good money, so my time is too valuable right now. Things could
> always change though. Many owners find a friendly AP to sign to supervise
> and sign off on their work as well, but thats usually on simple stuff, not
> renovation.
>
>
> >
> > >
> > >
> > > >
> > > > For a new plane everything is different. But in a busy club it can
> work.
> > > > It is working in a lot of clubs. It has to be managed properly to
> work
> > > > well.
> > > >
> > > >
> > >
> > > The reduced outages, greater marketability, and warranty on a new plane
> can
> > > help it make money. Insurance can be an issue though. The key to a new
> > > plane on leaseback is a plan for what to do after it is 5 years old.
> Can
> > > you step up, and still have a viable leaseback? Is plane number two not
> > > going to be a leaseback at all? Do you want to leave it in leaseback
> > > indefinitely? Are you planning to take it off the line and replace it?
> >
> > All good stuff. A couple of thoughts. Some new planes require more time
> > to be proficient than others. The Cirrus comes to mind.
> High-performance,
> > glass cockpit (lots of features in those new devices), the chute. So
> there
> > is some impediment in the form of time/money for getting checked out and
> > that could limit the uptake.
>
> I would check insurance rates with the fleet insurer before buying, but i
> doubt it will make sense to go with Cirrus due to rates. Diamonds are easy
> check outs, but rates vary from as good as Cessna or Piper to a bit higher
> depending on insurance companies' like or dislike of composites.


Cirrus has had some high-profile accidents.


>
>
> As for what to do after 5 years I would think
> > that the situation would dictate what to do. If it's in the air and
> paying
> > for itself let it ride.
> >
>
> That's a choice, but you may get tired of sharing too. :)


I think since I'm a cheap skate that I will not tire of sharing
expenses.


R. Hubbell
>
>
> > >
> > > I know people who have made a little money, but I would not count on
> that.
> > > If you have expectations of reduced costs only, you are more likely to
> end
> > > up happy.
> >
> >
> > Staying out of the red is good enough. And flying it too!
> >
> > Thanks.
> >
> > R. Hubbell
> >
> > >
> > >
> > >
>
>

[R.Hubbell]

On Thu, 12 Feb 2004 16:05:03 -0500 "Ron Natalie" > wrote:

>
> "Dude" > wrote in message ...
> > > > The key is YOU HAVE TO TAKE ALL YOUR REBATES AND SEND THEM TO THE LIEN
> > > > HOLDER! (The guy that taught me this was religious about it, and now so
> > am
> > > > I.)
> > >
> > >
> > > Not sure I followed all this so I guess I will have to look into it some
> > > more.
> > >
> >
> > Talk to a new plane salesman, or tax accountant for more info. Its a great
> > time to be buying.
> >
> It's hard to follow because it is garbled. It's his opinion of what you should do, rather
> than what is actually required by either the law or the lender. The issue is much the
> same with any "artificial" depreciation. You can end up with more tax liability on a
> sale than you have in equity. You're not really "upside down" as far as the lender is
> concerned. If you default, they can take the plane and it is still worth more than what
> you owe.
>

Sounds like more risk amelioration for the lenders.
I intend to do some research myself and/or talk to an accountant.



R. Hubbell

[Dude]

> It's hard to follow because it is garbled. It's his opinion of what you
should do, rather
> than what is actually required by either the law or the lender. The
issue is much the
> same with any "artificial" depreciation. You can end up with more tax
liability on a
> sale than you have in equity. You're not really "upside down" as far as
the lender is
> concerned. If you default, they can take the plane and it is still worth
more than what
> you owe.
>


I think you explained it better. I am an admitted anti-debt freak. I would
not have borrowed money for a plane at all unless I could con myself into it
being an "investment" because it was a business. Its working out well
though.

The bottom line is that I would never want to be in a position where an
unforseen event could leave me with an usecured debt to the bank or the IRS.
I will risk the perfect storm, but not the single hurricane :)