Finding and Financing your Club Aircraft

Finding and Financing your Club Aircraft

The main factors to consider in selecting an aircraft are purchase price, operating cost and intended use. These are interrelated and often lead to compromise unless a club has unlimited funds.

Determining the Budget

The cost of an airplane involves both purchase price and operating expenses. And though it's very impressive to have a fancy airplane sitting in the club's tie-down spot, each club has to be realistic and stay within its budget.

A club should initiate its search for an aircraft by taking a good, hard look at its finances and deciding how much it can afford to spend for the initial purchase and for ordinary fixed costs such as hangar fees, insurance, annual inspections, and so on. It's also a good idea to have a cash reserve handy for unexpected expenses. Once club members have determined how much purchase money is available, they can begin narrowing their choices to aircraft within that price range.

The actual purchase price of a specific aircraft depends on age, how well it's equipped, how well it's been maintained, total time on the aircraft and engine, the current demand in the marketplace, and many other factors. AOPA has an aircraft valuation service provided by Vref that is helpful in determining the value of an airplane.

Usually, the newer and more complex the aircraft, the more expensive it will be to purchase and maintain. A high performance, retractable gear, variable pitch propeller aircraft will cost more than a fixed-gear, fixed-prop model. The age of an airplane may also affect operating and maintenance costs. Newer airplanes may carry better warranties than older airplanes, and that may lower maintenance costs in the short run. Parts for new aircraft will be easy to obtain, while parts for older aircraft may occasionally be hard to find. When parts are hard to find, such as for antique aircraft, they may have to be specially manufactured which means they'll be very expensive. And because of the time involved, a club's aircraft could be grounded for months.

New airplanes may depreciate rapidly during their first few years. However, it is not uncommon, especially during times of rapid inflation, for used aircraft to appreciate. Models of some very desirable aircraft even sell for more used than they did new more than 15 to 20 years earlier. A good used airplane, then, could be a sound investment for a club considering expanding or upgrading in a year or two.

Any prospective purchase, new or used, should be inspected by the club's mechanic, and the club should have a title search run to make sure the title is free of liens and encumbrances. AOPA offers title search services to assist with this part of the purchase process. Up-to-date airframe and engine logbooks should always accompany any purchase.

Intended use of the Aircraft

Intended Use of the Aircraft

The next factor to consider is how the aircraft will be used. Will it be used for local flying, short trips, or long trips? IFR or VFR flying? Business, training, or pleasure? Or a combination of uses? When the basic purpose is agreed upon, a club should narrow its search for the right aircraft even further by considering seating capacity; useful load; cruising speed; range; takeoff and landing characteristics; high-wing or low-wing; fixed or retractable gear; instrumentation; and operating costs such as fuel, oil, maintenance, and overhauls. If these factors are not considered before a purchase, a club could get stuck with an airplane that is lovely but doesn't fit its members' needs, doesn't get used, and ultimately is responsible for the club's failure.

Not all clubs will approach cost and intended use in the same way. Some will decide how much they can spend while others may wish to decide what airplane to buy and then try to raise the money. Either way, a club must be aware of its financial limitations and be prepared to make some compromise.

It takes a lot of time and effort to organize a flying club but the rewards are sweet. Club flying is generally less expensive than renting because clubs usually do not operate for profit. And though it's great to realize the lifelong dream of owning an airplane, it's even nicer not to have to pay the full overhead alone. New friendships may develop as club members work together to build a solid organization, and a little hangar flying on a rainy day is a ray of sunshine on any pilot's soul.

But it's important for club members to research many factors before joining or forming a club. Compatible members should agree on the purpose of the club, the intended use of the aircraft, financing the club, the form of organization (co-ownership, incorporation or unincorporated association), how to administer the club, and many other considerations.

And each member must be prepared to do his share of voluntary work. As the old saying goes: "Anything worth doing is worth doing well." With flying clubs, that's especially true.


Some banks and finance companies specialize in financing aircraft, and a club may find it easier to get a loan through one of these institutions than through a local bank with no aviation expertise. Companies specializing in aircraft financing advertise regularly in national aviation publications like Trade-A-Plane or in regional publications. Aircraft manufacturer's finance subsidiaries remain very active in both the new and used markets as well.

AOPA members can take advantage of AOPA's Aircraft Financing Program. Call 1-800-62-PLANE for an application and information about current rates and terms. Financing

If, however, a club wants to finance an aircraft purchase through a local bank, the chances of getting a loan are better if one or more club members have already established good lines of credit at that bank. Even so, it may be difficult to get the loan. Most local bankers simply do not understand the difference between an ADF and a transponder, and don't care to take the time and energy to become "experts" in this specialized field. In a situation like this, even if the bank does grant a loan, the club may not receive the best possible financial package.

Before a club agrees to any financial arrangements it should investigate the terms carefully. Club officers or members familiar with financing aircraft, or any kind of capital equipment financing, should assist in setting up the arrangements. If necessary, a club should seek outside assistance from a knowledgeable person to help arrange the financial package. And a club should be sure to get all the information to which it is entitled.

Truth-in-lending laws require that all loans show the amount to be financed, the amount of monthly payments, the total amount to be repaid, the true annual percentage rate (APR), and any other charges involved. In a nutshell, clubs should know exactly what they are getting into before any members sign on the dotted line of an aircraft finance contract.

The interest rate on the loan will depend on the credit rating and credit history of the club, its cosigners, and any individuals providing personal guarantees. The amount of the down payment required and the interest rate a club obtains will also depend on many factors, including the type of aircraft being purchased, whether it is new or used, how it is equipped, and current market conditions.

Each club should search the marketplace thoroughly to get the best deal, since loans for aircraft are just as susceptible to economic fluctuations as other types of loans. In many cases a lender may require evidence that a used aircraft has been inspected by a qualified mechanic. Since it's always wise to inspect a used aircraft before purchasing it, this shouldn't present a hardship to the club.

Also, experienced aviation lenders will insist on a title search before granting a loan. This ensures that the airplane being purchased will be free from any unsatisfied debt. AOPA's Aircraft Title and Escrow Services, Inc. is a fully bonded industry leader with a full array of search services including title and lien services, Airworthiness Directive and Service Bulletin summaries, information on major repairs or alterations (FAA Form 337), complete microfiche filings, "N" number changes, full closing services, and much more. The title and escrow office can be reached at 1-800-711-0087.

Clubs may also find it possible to borrow money for purchasing avionics, instruments, major overhauls, modifications, and aircraft insurance premiums to be included in monthly loan payments. A few lending institutions even finance flight training.

A basic, conceptual question that we are often asked deals with the mix of financing and equity to apply in the club set-up. Obviously, if all equity is used—in other words if members buy an airplane with cash—the hourly rate could be very low, approximating the cost of gas, oil, and maybe perhaps some anticipated maintenance. While all equity is the safest route financially, many clubs are quite successful financing much of the club airplane. Banks are typically willing to finance 80 to 90 percent of the aircraft purchase price.

Clubs that choose to finance most of the cost of the aircraft then charge members higher hourly rates, often approximating rental rates. When this is the case, members are generally required to make a minimum monthly payment, regardless of how many or how few hours they fly.

Newer twists on flying club financial structure may involve one or more club members leasing their airplanes back to the club. This can be a very satisfactory arrangement for all parties because it spreads costs and increases aircraft utilization.