Aircraft True Cost of Ownership Spreadsheet

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ihfanjv
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Aircraft True Cost of Ownership Spreadsheet

Post by ihfanjv »

I developed a spreadsheet that calculates the cost of buying with cash versus buying with financing, and compares those two options to renting based upon user defined variables. I hope this is of some entertainment value to the users of this forum.

The user enters all of the following variables and the outputs are generated automatically:

Purchase Price, Sales Tax Rate, Pre Purchase Costs, Closing Costs, Downpayment Percentage, Amount Financed, Interest Rate on Loan, Loan Period in Years, Years of Ownership (1-7 years), Tach Hours per Year, Rental Cost Per Hobbs Hour, Hobbs/Tach Ratio, Wet versus Dry Rental Rate, Gallons Per Hour, Fuel Cost per Gallon, Oil and Misc per Hour, Annual Inflation Rate, Insurance % of Hull Value, Annual & Maintenance, Misc Annual Data Charges, Tie Down per Month, Hangar per Month, TBO, Overhaul Cost, Annual Depreciation Rate, After-Tax Return on Capital, Contingency Reserve

This sheet only works for years 1-7 of ownership. Why? Because calculations going out more than 7 years would have required a complex reworking of the sheet due to certain Excel limitations - had I known how complex this sheet was going to end up being I would have started it differently to have avoided this limitation. But, for my purposes 7 years is sufficient.

I developed this spreadsheet because I was frustrated with the common statement I have heard that goes something like "buying the airplane was way more expensive than I thought." That should not be the case. Nobody should be in a position where they enter a transaction without being able to figure out what a transaction might cost them, given reasonable assumptions that they are comfortable making. Also, the common statement I have heard like "aircraft ownership costs about 3 times the annual fuel cost" just never made any sense to me. Considering that there are many huge options with huge cost consequences to aircraft ownership, such as tie down versus hangaring, or cash purchase versus financing, I wanted something a little more tangible than the general information I found available.

Although I had seen many spreadsheets that calculated "total cost of ownership," each one that I had seen came with caveats like "this sheet does not take into consideration cost of capital." Also, I had never seen an analysis that took inflation into consideration, or took depreciation into consideration (other than tax-related depreciation - this sheet does not address tax issues other than sales tax as an operating cost). But, this spreadsheet also treats some costs as sunk costs where others may consider those costs capital items that should be reflected differently. Also, this sheet makes assumptions regarding capital returns (short terms returns versus long term returns) that the user might disagree with. USER BEWARE!

WARNING - THIS SHEET IS FOR ENTERTAINMENT PURPOSES ONLY! The methodologies used on this sheet are fundamentally flawed and may not be used for any purpose whatsoever. In other words, DO NOT RELY UPON OR USE THE INFORMATION ON THIS SHEET FOR ANY PURPOSE WHATSOEVER.

This sheet was not created with the intent to show that buying with cash is better than financing, or that renting is better than buying - this sheet generates no output or conclusion that says anything like that either way. All this sheet can do is calculate ballpark cost estimates regarding the true cost of ownership of an aircraft given assumptions the user makes (with built in flawed methodologies inherent in the sheet, of course!).

You are going to need Microsoft Excel in order for this spreadsheet to work. The spreadsheet is available for download here: http://bit.ly/ObXAd7

Enjoy.
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Jeff
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Re: Aircraft True Cost of Ownership Spreadsheet

Post by Jeff »

Check out Sam Millers www.aircraftcostanalysis.com. Sam includes all diamond models and is very comprehensive.
Jeff Owen
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Premier Aircraft Sales, Inc.
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954-771-0411
jeff.owen@flypas.com
http://www.flypas.com
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Re: Aircraft True Cost of Ownership Spreadsheet

Post by ihfanjv »

That looks great! I wish I knew that existed before I started on my own. Without a doubt, www.aircraftcostanalysis.com has the advantage of being professional. This one I created has the advantage of being free (and fundamentally flawed, of course).

I edited the sheet to include an input for a first year depreciation rate different than subsequent years depreciation, to account for the "drive off the lot" effect of initial purchase.

The revised spreadsheet is available for download here: http://bit.ly/ObXAd7

Enjoy!
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Lance Murray
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Re: Aircraft True Cost of Ownership Spreadsheet

Post by Lance Murray »

Now why would anyone actually want to know how much the airplane cost to fly? Ignorance of the true cost is much more fun.
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Tim M
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Aircraft True Cost of Ownership Spreadsheet

Post by Tim M »

When people ask me how much money is needed to own my airplane, my stock reply is, all of it of course. :)

When we bought ours we didn't approach it as a thing. Rather, we thought about it as a ticket to a certain lifestyle. For us it means staying in touch with family that are scattered all over Texas and Louisiana in a way that only general aviation can enable. It's good to go through the exercise of calculating the nominal cost of ownership but when it comes time to assemble the income and balance statements the lifestyle benefits factor in very heavily.
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Re: Aircraft True Cost of Ownership Spreadsheet

Post by Kai »

Lance Murray wrote:Now why would anyone actually want to know how much the airplane cost to fly? Ignorance of the true cost is much more fun.
I definitely have to install a "Like"-button here.
Tim M wrote:When people ask me how much money is needed to own my airplane, my stock reply is, all of it of course.
That's a good one, too. My favourite saying is "If you have to ask, you can't afford it".
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Re: Aircraft True Cost of Ownership Spreadsheet

Post by ihfanjv »

I agree with all of your positions. Unfortunately, I know a few people who got in way over their heads in ownership. I think that they were never told about and probably didn't ask what the true costs were. They add up quickly.

Also, this analysis taught me how buying the right plane is important, and how spending a lot more at the front end doesn't make total cost of ownership much more expensive at the end of the day.
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Re: Aircraft True Cost of Ownership Spreadsheet

Post by Kai »

No matter how much you calculate, I have found out that there are always a couple of suprises which can easily cost you $10k:

"Oops, I really need a powerflow now."
"Oops, is a new prop really $8k?"
"Geesh, I shouldn't fly SPIFR without SVT"

The list of "oops" and "errrs" is endless. The entire spreadsheet gets messed up when you can't fly the calculated hours because your wife suddenly doesn't like flying anymore or you have to chip out 10k for a new SVT.
DA40F - N405FP/HS-KAI (sold)
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