Purchasing a Plane? Here's Why It Is a Good Investment!
Are you thinking about purchasing a plane?
That's quite an expenditure, but you can afford it. However, it seems you're still not sure about it.
Well, in that case - this article is for you. We will go over why purchasing a plane is a good idea, and some things to consider, such as cost, storage, insurance.
Keep reading to get informed on the subject, and make an educated decision.
Is Aircraft Ownership a Good Idea?
Buying an airplane can quickly become overwhelming. But it doesn't have to be. With the help of a useful appraisal software from VREF Online and VREF Senior Accredited Appraisers - you can become assured that your purchase is the right one.
In any case, determining if ownership is a good idea comes down to your realization of the benefit to you. So it's best if you start by asking yourself this:
- What are the benefits of owning an aircraft TO ME?
- Am I able to set aside 25% of the budget for maintenance?
- Am I buying for my company or my personal use?
- Will this be a shared purchase?
- Should I lease, finance, or buy outright?
- Is the model I like going to hold its value?
Of course, these questions are just examples, so you should come up with some rational thought-producing questions which are pertinent to your situation.
For Frequent Flyers, It's A Great Investment
Aircraft ownership is an excellent investment for those who find themselves on a plane quite regularly, and even more so - if you have an aversion towards the daunting customs, baggage lines, and commercial airline procedures. Regulations are only getting worse. Do you want to stand in a TSA line with people who might get you sick?
For a frequent flyer, a privatized airplane makes a lot of sense. It provides you with the freedom to act and do as you like, but it also implicated the confidence of being ready for taking on the deals of the moment and obstacles of the future. With aircraft ownership - you have a plane at your disposal, and you get to decide when you're available.
This is important for the corporate sector, as it means you won't miss out on opportunities or deal closure. Time is money, and when you spend less time in the airport, checking bags and filling out paperwork - you're able to pay it only when you need to.
But for a passionate flyer, a personal aircraft allows them to make friends and family across the world for events, travel across the country at discounted prices, and, most importantly, the freedom to come and go, as you like.
An Aircraft Holds Its Value Over Time
It wouldn't be much of an investment if it did not secure a financial recourse in some way. Unlike other forms of transportation such as cars, motorcycles, etc. - airplanes, jets, and helicopters appreciate, instead of decreasing.
In most cases, a frequent traveler will find themselves financing an aircraft, as they require upgrades, maintenance and allow you to spend less capital on outright purchases.
So when you consider financing over direct purchasing, you also think about the appreciation of aircraft for the long term.
For instance: over a 5-year term, an aircraft is expected to be at a similar price to the original price, if not a little bit higher, which means that financing is sort of a way to use the plane in installments of rental fees, and decrease the insisting cost of borrowing.
The recreational airplane market is less affected by economic fluctuations, allowing the value to stay more consistent. In contrast, a business jet that holds excellent value is more or less stringent upon the state of the economy as well as numerous factors, including technological obsolescence and the cost of ownership.
So What Are the Upfront Costs?
So when it comes to purchasing an airplane, the first thing you want to consider is the type of plane that will significantly affect the price point.
So here are the main three categories for purchasing a plane:
LSA is a single-seat, single-engine plane, mostly for recreational purposes. They can be purchased new in the range of $8000 up to $17000.
This type of plane usually holds two or more people and is significantly more economical in terms of operation and maintenance, unlike a multi-engine aircraft. It typically costs anywhere from $15,000 to $120,000.
A multi-engine plane can hold a large number of people and requires a lot more maintenance and other additional costs over the two previous groups. It will usually range in the $75,000 to $350,000.
If you're one of the lucky few, you can pay your plane in cash. But not everyone is capable of doing so. So you might have to get a loan for the purchase, so consider interest on-top of the initial price.
However, don't get comfortable - there are plenty of other cost considerations to consider.
When you are not using your plane, it must be stored in the airport, either outdoors or in a hangar.
Outside storage is cheaper than a hangar. But this depends on the environment and location of the airport itself. A municipal airport will charge more than a rural one.
So on average - the cost of rent is about $300 per month + $150 for tiedown gear. However, residential storage is also a potential opportunity for a small plane owner.
Insurance is a must when it comes to aircraft. It covers damage and provisions liability for damages. The coverage will vary by damage type, plane type, and policy.
When it comes to choosing your insurance, it costs anywhere from $1500 to $2500 per year, so you should consult with a licensed insurance professional who works in the industry.
Oil & Gas
A small airplane has to receive an oil change every 50 hours or four months. Whichever is first. For an average user, this comes to about three changes per year.
An average small plane fuel burn rate is 5 to 10 gallons per hour. And as aviation fuel is a lot more expensive than regular vehicle fuel, it comes at about $5 per gallon of fuel.
It is recommended that you establish an escrow fund for the maintenance of the plane (engine, avionics, airframe, propellers). Contributing to the fund each time you fly, helps cover any unforeseen expenses that can come with plane flying.
A small aircraft is required to be inspected annually, which can cost anywhere from $500 to $4000, while a specialized plane with retractable landing gear will cost a lot more.
Purchasing a Plane? Is It Right for You?
Now that you understand the investment opportunity of purchasing a plane, you are well on your way to making the right decision for you.
In any case, it's your money and your investment - so the choice stands by you.