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#21
February 12th 04, 04:58 AM
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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 
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#23
February 12th 04, 05:10 PM
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"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.
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#24
February 12th 04, 08:05 PM
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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
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#25
February 12th 04, 09:05 PM
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"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.
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#26
February 13th 04, 01:42 AM
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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
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#27
February 13th 04, 02:45 AM
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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
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#28
February 13th 04, 02:48 AM
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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
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#29
February 13th 04, 04:56 AM
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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
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