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#11
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"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 |
#12
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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. |
#13
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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 |
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"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 |
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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. |
#18
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"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 |
#19
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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 |
#20
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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 |
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