Would you "Back into" a Traffic Lane?
Only if you wanted to cause an accident! So why do we "back into" major decisions? I'm referring to those "comfortable" decisions that we make everyday rather than the right decisions. The times we choose the familiar, the simple, and the perceived lower risk.
But is it really lower risk? Consider the following:
Rick is learning to fly and decides that owning his own airplane will provide convenience and financial benefit over renting. His business takes him to various locations throughout a 5 state territory and he's spending many nights each month in hotel rooms rather than at home with his wife and two teenage sons.
So far, Rick's decision to buy an airplane seems to be a good one, and one that will enhance both his lifestyle and his business. He'll be able to visit several of his business locations and arrive home in time for dinner with his family.
Rick decides to spend up to $40,000.00 for an airplane and begins his search for an airplane that meets his criteria. Rick is "backing into" an important decision and making a mistake that could have grim consequences.
Let's look at Rick's options:
Skyhawk N model: run out engine, moderate airframe time, 25 years old, dated avionics, needing paint and interior, not capable of carrying the family and luggage, limited range for some of his business locations. This Skyhawk might be affordable, but it's not the right airplane for Rick!
Partner: Rick could choose a partner to help with the purchase and affordability. While $80,000.00 would buy a newer airplane or one with more capabilities, a partnership creates problems of its own. Do both partners have the same needs? Will availability be an issue? Do both partners agree on the level of care and maintenance needed for the airplane? Will Rick settle for an airplane that's a compromise rather than an airplane that will accomplish his mission? Even with a partner, the finance companies will require that Rick is capable of making the payment each month without the help of a partner. Can Rick get approved for an $80,000.00 loan? Can Rick stay afloat if his partner bails out? So now Rick has $80,000.00 a risk and he still may not have the right airplane for his mission!
Join a Flight Club: Rick could buy into a flight club with $40,000.00, but he's back to some of the same renting issues that caused him to consider buying. Yes, in many clubs Rick would actually own part of the corporation and its assets (the airplanes), but what did he accomplish by joining? He still has to schedule the aircraft, insurance is high, multiple pilots tend to increase wear and tear on an airplane, and Rick still may not have the airplane that's right for his mission!
What's Rick to do?
1. Start by choosing the airplane that's right for his mission. Consider:
- Safety, safety, safety!
- Type of flying
- Typical number of passengers
- Typical length of trip
- Pilot capability
2. Explore the affordability of purchasing "New"
- Lower payments
- Lower interest rates
- Lower initial investment
- Longer amortization
- Significantly lower operating costs due to warranty Greater tax savings for new equipment
3. Work with an aviation finance company to structure a purchase that will allow you to purchase:
The right airplane for your mission The newest airplane you can afford
In that order!
With a bit of planning, Rick may find that he can afford a safer, newer airplane and one that will fly his family, assist his business, and match his piloting capabilities. He'll avoid the safety and financial risks of an older airplane and expand his purchasing options rather that limit himself to what's in Trade-a-Plane. Perhaps he's never considered himself a "new" aircraft owner, and finds it easier to "back" into his purchase using a dollar figure as his main criterion.
Well, what may be easy today could pose problems down the road that he never dreamed of! We owe it to ourselves to consider all possibilities regardless of the time and effort involved, in all of our decision-making. Anything worth doing is worth doing RIGHT!
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