Let’s say you have $100K in cash after house sale or something. You want to buy a plane. A nice plane. You’re toying with idea of buying a newer Cirrus and financing it. $100K down, finance $400K. Sounds great. But almost certainly, you now will come up against a debt-to-income ratio lenders adhere by. Here int he US, that’s around 45% (you can not have loan payments of more than 45% of your monthly salary). For most of us, that ratio will most likely be taken up entirely by our house mortgage and car. So now that plane loan is only possible if you:
A) Are mortgage free and car is paid.
B) You have such massive taxed income that your mortgage is only a small fraction of your debt-to-income ratio.
C) You can pay mostly cash for it.
Neither of these scenarios describe the average plane buyer in my opinion. So I sometimes wonder, who is going to buy all these new 182T’s, Cirrus, Mooney’s, SF50’s, Denali’s etc? “They just finance it through their company”, I hear you say. No, I checked – I asked about financing a later model Turbo Commander on my company and they said, “no problem, but you have to personally guarantee the loan and your personal fiancees is what we look at, not the company’s”. There went that dream.
Seems like aircraft financing needs a completely new model if they want to shift more airplanes in the future. There are only so many people in the world who have $1 million laying around in cash for a new Cirrus.
In the scenario you describe I would rather buy an average TB20, nice 182 or older Mooney for € 100 K than to try to get a loan for € 400. It’s a personal thing, but I would never go into debt for an airplane.
I also did not buy my airplane (€ 250 K including upgrades) through my company – I took the money out of my company, paid taxes on the amount and bought the airplane privately. To me this felt much better than “buying an airplane for the company”. I like to have a sharp line between my private hobies and the company. Also my company does not have any real “missions” for the airplane (or maybe only 3 times per year).
I know some people who bought new SR22s for around € 1 million, but i would not. My 2006 model, while not equipped with some of the latest gadgets (SynVis, Hypoxia descent, infared camera, …) has the same performance as a 2017 model, and I bought it with less than 800 hours. Makes no sense to me to buy a new one for € 750 K more (and I could not afford it or justify it anyway).
Most important to me: I prefer to have some cash on my flying account, … just in case.
The problem I see mostly is that the prices of new airplanes are ridicoulously high. That is why the market has been dead for the last few decades, in comparison to the heydays of GA. We are seeing less than 1000 planes sold per year. That is nothing at all.
99% of GA planes today are bought 2nd hand, as depreciation and value for money is simply not there with new planes.
What the industry needs to do is to analyze very honestly and openly why prices are what they are and then come up with a way to get all the overhead cost as well as induced costs such as insurance against any and all loony claims e.t.c. either out of there or reduced massively.
Right now, new planes are primarily bought either by organisations or schools and by a few rather wealthy individuals. But this will not generate the volume needed to slash costs.
If you’re spending half your income on loan repayments, you should probably not be financing your hobby with another loan 
Joking aside, Porsche produced 230,000 cars last year and they all found a buyer. Yes you can finance or lease a Porsche, but that is not making the car any cheaper to own.
If you could make a fraction of the Porsche buyers interested in flying, you would be in business, and I think that is exactly what Cirrus has had some success in doing by producing an aircraft where the build quality starts to meet expectations.
… and I think that is exactly what Cirrus has had some success in doing by producing an aircraft where the build quality starts to meet expectations.
That’s another reason I wouldn’t buy a NEW airplane. The build quality of all of them (except the TBM, PC-12) is really so low in many details, it’s a shame. The other day I took some electrical connectors apart which connect the various sensors with the DAU (data aquisition unit) … and those were so cheap, you would not find that stuff in a Chinese hairdryer. I suffer less from that stuff when I don’t buy new. Also my plane went UP in value in the last three years! I could now sell it for more than I paid, icluding all the upgrades!
At AERO I had a close look at the new Piper Meridian. The paintjob looked like it was done with a brush on some parts, and the carpeting in the cabin reminded of East German Cars from the 1960s …
mmgreve wrote:
Yes you can finance or lease a Porsche, but that is not making the car any cheaper to own.
If you are a self employed professional or have your own company, then leasing payments are 100% tax deductible in my country. Otherwise Porsche (or Cessna or Cirrus or Bombardier or Dassault) would sell only 10 percent of their products.
Only if used wholly for business travel, generally speaking.
Peter wrote:
Only if used wholly for business travel, generally speaking.
I am sure that all those Porsches are only used for “business travel”. And the Citations and Falcon 7Xs as well. There is always a trade fair or customer to visit close to a place where one can have a nice long weekend. And who says that one can not have a discussion with a client on a yacht in Monaco? I’ve been in this business for quite some time now…
what_next wrote:
If you are a self employed professional or have your own company, then leasing payments are 100% tax deductible in my countr
While not knowing German tax law, I would still take a bet that you’ll get taxed on having access to your company car, unless you can prove that you only use it for business purposes – and the burden of proof would likely be on you.
It’s really simple.
I use my company car privately too and I have an electronic logbook on my iPhone to distinguis between work related driving and private. At the end of the year the app creates a PDF and all necessary statistics and I send that to my tax consultant…. done.
All I have to prove that I use this car mostly for work. At the moment I am at “85 percent work”, so no problem. This way I can deduct all car related costs from my tax.
