Whether you finance this purchase internally or through a financial institution, you will still have interest expense. It'll be either your lost opportunity cost or their interest payment! The general rule of thumb is to buy as much plane as your tax appetite can swallow!

• Thanks to continuing demand, planes generally hold their value and/or climb with inflation. As a result, unless you must sell in a recession cycle, you will probably get out of your plane what you put into it, and quite possibly more. This takes care of the principal.
• Thanks to Uncle Sam, not only is the interest deducible, but the tax savings from depreciation from the plane will more than likely cover the interest expense.
  • The annual interest on $100,000 borrowed at 8.5% is $8,500, or $42,500 over a 5 year period.
  • The depreciation on a $100,000 plane over 5 years is $100,000 (a full write-off.) In a combined federal, state, and local tax bracket of 50%, that's a $50,000 gift!!
  Actually, it's not quite that simple (don't we wish). So, it will be best to confer with your tax advisor, hopefully one who has experience with airplanes.
• The amount that is finally decided upon should be one that does not prove to be an obstacle in your ability to make wise personal, family and business decisions.

The amount decided upon, like all capital decisions, should be one that will do the job! Spending too much may cost a few dollars more. Spending less may save a few dollars at the cost of everything you bought the plane to accomplish.

There are many options available to finance a plane!

• Finance it yourself out of savings or by selling assets.
• Use your line of credit.
• Home Equity Loan
• Traditional Banks
• Banks specializing in aircraft
• Non-bank financing

I've heard many people say that they could buy a lot of fuel for what they could save on the acquisition cost. This is true. But, as a general rule, buy as much plane as you can afford. Every dollar spent on acquisition will more than likely come back to you at resale time. Every dollar spent on maintenance, fuel and other variable expenses, is a dollar you will never see again!

Your accountant, CFO, and other financial advisors should be contacted for their recommendations. The benefits of determining budget numbers early in the process will save you time, help you focus on a narrower range of aircraft options and allow you to sleep a whole lot better! Plus, you can honestly tell potential sellers that you are pre-approved for a given amount of money by a specific institution. This credibility separates you from the "tire kickers", and benefits both parties during the negotiation process.

Now that you have figured out what you have budgeted for acquisition, let's figure out what to budget, so the plane can actually be flown!