Purchasing a Used Aircraft- How to Avoid Frustration

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Purchasing a Used Aircraft- How to Avoid
Frustration

• Dr. R. Kurt Barnhart, Indiana State University

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Some Aircraft Ive owned (individual and shared)
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Buying to Build and Fly OR Buying to Fly?

• Advantages to building
• Build to your Taste
• Higher Performance at lower cost
• Enjoyment (for some)
• Great Education
• Performance that certified (stock) aircraft
  dont have for lower cost (i.e. the RV series.)

• Disadvantages-
• Some aircraft can take years to complete
• Some models may be hard to sell later (also
  liability may follow you)
• You may not have the patience or skills for
  building
• Builder support may be inconsistent

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Where to Start?

• Define your mission
• How Far do you need to fly regularly?
• How many people do you need to carry?
• Examine how much money you want to spend. (Does
  your spouse agree?)
• Do your homework
• Talk to other pilots, mechanics, like aircraft
  owners
• AOPA has buyers reports on most popular aircraft
  and other resources for members at
  http//www.aopa.org/members/vref/
• Browse the Ads- www.trade-a-plane.com
• www.aerotraderonline.com
• www.barnstormers.com

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Check the NTSB accident statistics

• www.ntsb.gov click on Aviation and then use
  the Database link to search for a particular
  make and model.
• For Instance The Mean Fatal Accident Rate for a
  Cessna 172 is 1.41 per 100,000 flight hours and
  it is 3.24 per 100,000 flight hours for a Cessna
  180.
• Cessnas average is 1.65 while the fatal accident
  rate for Bellanca is 4.84/100,000 flt. Hrs.

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The Operating Cost Factor

• Dont assume initial acquisition cost is related
  to operating cost.
• Certain aircraft are maintenance pigs

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Some Factors affecting the Owning and Operating
Costs of an Airplane

• Type of operation- pleasure- transportation
• Age of Aircraft
• Number of hours flown
• Maintenance shop rate
• Pilot experience (insurance)
• Taxes
• Fuel prices
• Hangar Prices

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What are those Ads Saying?

• i.e. 1968 C-150, 0 STOH, 985 SMOH, 3587 TTSN,
  Garmin GNS 400 GPS, All ADs C/W, Annual with
  sale, Mode C xpndr, STOL kit, Auto Fuel STC.
• Here is a glossary of terms http//www.trade-a-pl
  ane.com/unprotected/static/glossary.html

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Abbreviations from the previous page

• STOH- (Time, in hours) Since Top Overhaul (top of
  engine)
• SMOH- (Time) Since Major Overhaul (engine)
• TTSN- Total Time Since New (in hours)
• GNS- Global navigation system

• GPS- Global Positioning System (for navigation)
• AD- Airworthiness Directive (maintenance youll
  have to do)
• C/W- complied with
• XPNDR- transponder
• STOL- Short TakeOff and Landing
• STC- Supplemental Type Certificate

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What the ads are really saying

• Running Strong- Start shopping for a major
• Loaded with gear- has all the junk radios nobody
  wants
• Fresh paint- sat and rotted for the previous 10
  years
• No Damage history- check again
• Everything works- plan on numerous visits to the
  shop

• Economic Transportation- Owner has no concept of
  the cost of flying
• Just spent XXX on annual- owner has learned his
  lesson and is getting out
• Only burns X.X GPH- was over-leaned and youll
  buy the valves
• Wife says must sell- The Only honest one in the
  group

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So youve found one you like

• Major Factors that affect an aircrafts value
• Total Engine Hours
• Installed Equipment
• Airworthiness Directives
• Damage History
• Paint Interior

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Some Initial Questions to Ask via Telephone-
(youll verify the answers later)

• Establish Airworthiness- current annual
  inspection, transponder, and pitot static
  inspections also
• Ask about the logbooks- are they complete? If
  not, then this reduces the value of the aircraft
  and you may want to look elsewhere especially if
  the aircraft is older.
• Get pictures
• Inquire why selling
• Inquire about ownership history

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So you want to look further

• Schedule a pre-purchase inspection- be wary of
  using the sellers mechanic, find one yourself.
• Shop for insurance early- are you insurable in
  this aircraft?
• Some insurance considerations
• Your total flight time
• Your total time in type or similar aircraft
• Your claim history
• Your flight currency level
• Have a Title Search (AOPA, KING,
  www.aircrafttitlesearches.com etc.) for 50 -
  100 to ensure there is no lean on your
  aircrafts title

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Financing

• Will you be financing your purchase? If so, use
  a lending institution familiar with aircraft.
• www.findaircraft.com
• www.iflyamerica.com
• www.airplanedreams.com
• eairplanefinancing.com
• www.aopa.org/info/ip/

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Financing Ctn.

• There may be tax and liability advantages to
  registering your aircraft to a separate LLC so
  get this started early.
• Does the lender service the loans after closing?
• Does the Lender do a title search or file forms
  with the FAA?
• Consider all fees- not just closing costs- they
  can add up
• Consider the terms- some limit aircraft to 7
  years!
• Can the lender close by the time you need them to?

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The Visit

• Have a copy of the pre-purchase inspection the
  ensure the aircraft is airworthy.
• Test Fly- Does it fly straight? How does it
  stall? Does everything work? How are the door
  seals? Does it perform according to model
  specifications?

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The Deal

• If youre ready offer, be sure you know what
  similar aircraft are worth and what like models
  have been selling for.
• Remember that trade-a-plane prices are asking
  prices. Make some phone calls and find out, some
  owners will tell what they paid and others wont.
• For AOPA members there is an aircraft value
  calculator to be found at http//www.aopa.org/mem
  bers/vref/default.cfm

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Buying from a Distance

• Be sure your interests are well-represented
• Use a buyers agent or someone you trust (must
  have limited power of attorney privileges)
• Use an escrow service- an escrow service acts as
  an independent 3rd party that holds the payment
  funds until the buyers terms are met (usually
  transference of the title) such as
• www.airtitle.com
• www.wbaircraft.com/escrow.htm
• www.aopa.org/info/certified/tne/

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The Deal

• Forms youll need 1 Aircraft Bill of Sale

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The Aircraft Registration Form

• Be sure to include the printed or typed name of
  the signer in the signature block at the bottom
  of the form
• Required as of March 23, 2004
• You can operate the aircraft for up to 90 days
  with this application while you await the
  permanent.
• There is a 5 fee for this application

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Final Checklist (From AOPA)

• Parties
• Identify the parties to the contract use the
  complete name and address for both.
• For convenience purposes you may want to attach a
  specific, short title to each party for use
  throughout the contract for example "BUYER" and
  "SELLER", "PURCHASER" and "OWNER", etc.
• Purposes
• What is the purpose of each party behind the
  contract.
• Aircraft
• Identify the subject aircraft completely. This
  should include make, model, serial number and FAA
  registration number.
• Do you also wish to list the major components and
  accessories to the aircraft radios, engines,
  props, etc.? If you do, you should identify these
  items by serial number.
• Date/location
• What will be the date of the sale and delivery of
  the aircraft?
• Where will the sale and delivery take place?
• Cost
• What is the agreed upon selling price?
• When and how will payment be made?

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Final Checklist Ctn.

• Deposit
• Will you leave a deposit on the aircraft? How
  much?
• What happens if you cannot get financing or if
  you change your mind? Do you forfeit the deposit?
  How will the deposit be returned?
• Aircraft condition
• What will be the condition of the aircraft at the
  time of delivery? Airworthy? Current annual? All
  ADs complied with? Complete with all documents
  required by Federal Aviation Regulations?
• What warranties does the seller make as to the
  condition of the aircraft?
• Encumbrances
• Are there any encumbrances on the aircraft? If
  so, how and when will they be satisfied? (Be sure
  you get any necessary releases.)
• Does the seller know of any other potential or
  threatened claims against the aircraft?
• Does the seller warrant the title?
• Default/enforcement
• What if either party defaults on the terms of the
  contract? What are the rights of the other party?
  
• Do you want to provide for arbitration prior to
  legal actions? If so, outline the arbitration
  procedure. Do you want to make the results of the
  arbitration binding on both parties? Who will pay
  for arbitration costs?
• Invalidity of specific contract provisions
• Do you want the entire contract to be considered
  invalid if a court determines that one of the
  terms of the contract is invalid?

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Final Checklist Ctn.

• Time of essence
• Do you want to make time of the essence in the
  contract? If not, the parties will likely be
  given a "reasonable time" to comply with any of
  their requirements under the contract.
• Governing law
• Under which state's laws do you wish to have the
  contract construed and interpreted?
• Modifications
• Do you want to require that any change to the
  contract be in writing? If so, should be signed
  by both parties.
• Waiver of provisions
• Do you want to be able to have the flexibility to
  decide not to enforce one or more of the
  provisions of the contract against the other
  party without your actions being construed as a
  complete waiver of the provisions?
• Signatures
• Get signatures from the appropriate individuals
  or corporate officers. If an officer, be sure to
  include his or her title with the signature
  block. Make certain that person has the authority
  to sign.
• Does your state have any specific formalities for
  such a contract? Should it be notarized? Should a
  corporate seal be affixed?
• What is the effective date of the contract?

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Enjoy your New Aircraft!!!