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Most people buy jets backward — they fall for the aircraft first, then try to justify it. Chris Lee of 1st Source Bank explains why the mission should come first, and what Warren Buffett’s own change of heart can teach every prospective buyer.
Chris Lee has spent his career on every side of the aircraft transaction. He’s been a pilot, an aircraft salesman, a financier, and an owner. As President of the Aircraft and Specialty Finance Deposit Divisions at 1st Source Bank, he now helps clients make what may be one of the largest and most emotionally charged purchases of their lives.
In a recent conversation with Monitor editor-in-chief Rita Garwood, framed around his article “How Not to Buy a Jet – The Mind, the Mission, and the Money,” Lee laid out the mission-first framework he uses with clients, walked through the well-known story of Warren Buffett’s change of heart about his own aircraft, and explained why ownership isn’t always the right call. The conversation below has been lightly edited for length and clarity.
Rita Garwood: Before we get into the article itself, which this conversation is framed around, I wanted to start with you. You’ve been in nearly every part of aviation throughout your life — a pilot, a salesman, a financier, an owner. Can you share your history with aviation?
Chris Lee: It started when I was very young. My family was in aviation growing up, and I was surrounded by it. My father worked for an OEM, an original equipment manufacturer, and he’d done everything from an A&P mechanic all the way to sales and management. Then he became an aircraft broker and started his own business, and I helped him as much as I could at a young age, researching aircraft that might be available for sale to meet the needs of his clients. That led me to pursue a degree in finance and become an aircraft financier, starting back in 1997. I’ve been financing aircraft for many years now.
Garwood: With that range of perspective, how does it change the advice you give to buyers compared to somebody who’s only ever sold or financed aircraft?
Lee: Anytime you’re a pilot and you operate an aircraft, you learn a lot about what’s involved in owning one — the intricacy of looking at logbooks, the training aspects, the safety aspects. Being an owner is a big part of that. And working for an OEM gave me a unique perspective on how aircraft are put together. A lot of people would be surprised to know that many of the aircraft flying privately are all hand-built — even a lot of the bigger jets. When you visit a production facility and see people on the line installing rivets by hand, one at a time, it’s surprising there’s not more robotics or standardization. That gives you another perspective. On the financing side, the most exciting part for me is seeing people from all walks of life — someone comes in as a piston owner, graduates into a turboprop or a twin, and eventually gets into jets. It’s exciting to support clients through that whole purchase cycle and help build the team we recommend every client assemble as part of the acquisition process.
Garwood: In your article, you wrote that aircraft are not purchased for what they are — they’re purchased for what they enable. What’s the moment when you first understood that distinction for yourself?
Lee: That goes back to my studies in finance. In school, I researched some of the greats in the investing world, and one of those — many listeners may have heard of him — is Warren Buffett, the investor up in Omaha. He famously quipped that the purchase of his first aircraft wasn’t something he could justify, so he gave it a nickname: “The Indefensible.” Not long after he’d owned and operated it for a while, he had to change the nickname to “The Indispensable.” I think that story summarizes what a lot of clients bring to us, especially when they’re new to aviation. They come in, maybe they’ve fallen in love with a particular aircraft, and we walk them through what Warren went through himself — what the aircraft actually brings to the table — and work through the mission profile they’re trying to solve for, to make sure they get the aircraft that’s the right fit.
Garwood: The central argument of your article is that most buyers get the order of operations backward. They fall in love with a plane, then try to justify purchasing it. What does that mistake actually look like in a real deal, and what are the warning signs when someone walks in aircraft-first?
Lee: You can see a warning sign early in a deal. Sometimes a client will approach us and say, “I found an airplane, it’s near the end of the year, and I’d like to purchase this for tax purposes — can you finance this without a pre-purchase inspection?” Technically, we could, but we don’t, and we don’t advise clients to make acquisitions that way. It’s not illegal, but it’s not good practice. How many of us can say we bought a home sight unseen, without an inspection? Any asset acquisition of this size deserves due diligence, and we support our clients through that process. If a client insists on skipping the pre-purchase inspection, that’s a first red flag. The good news is, we can usually solve for that. We help clients get acquainted with what’s available in the market for MRO inspections — a shop looking at the logbooks and the aircraft itself to confirm it’s airworthy and operating as intended. That benefits not just the financial institution behind the purchase, but the client’s and their family’s safety. We’ve been doing this for 40 years — the bank’s been around since 1863 — and we have a vested interest in offering that experience to make sure clients are making the right decision.
Garwood: Going back to mission — can you walk us through the mission questions you’d actually ask a client? Passengers, distance, frequency, things like that. How does that conversation usually go, and where does it typically surprise the buyer?
Lee: Some clients want us to help directly with that. Others prefer to have a broker help them — an aircraft broker is probably our recommendation for most clients diving into the mission portion. But even if a client doesn’t use a broker, we can help. One place to start is loosely using an 80/20 rule: does this aircraft meet 80 percent of your expected travel needs over the course of a year? If it can, you’re in good order most of the time. If you only need to fly to Europe once or twice a year, do you really need an aircraft that can cross the Atlantic nonstop? That doesn’t necessarily fit the mission, because it falls outside that 80 percent. There’s a temptation for clients to want an aircraft that can meet every single mission, every single long trip — but there are other ways to cover that remaining 20 percent, from a first-class airline ticket to charter to a fractional purchase. I’ve never seen two deals that were the same, even within one client’s own purchases, so we fit the solution to the situation. We start with the mission profile — what are you using it for, where are your operations, where’s your family — and let that guide which aircraft can fit. Ultimately the client makes the decision. It’s not the bank’s call. We just want them going in with their eyes open.
Garwood: In the article, you reference the idea of “good, fast, or cheap — pick two,” and apply it to aviation. Can you give a concrete example of how that trade-off plays out, say, choosing between a turboprop and a light jet?
Lee: That’s a philosophy that applies to a lot of scenarios. Take aircraft financing as an example — it’s rare to find an institution that can give you good, fast, and cheap all at once. If you choose good and cheap, you often won’t get it fast. If you do fast and cheap, it might not be good. In any situation, a client is generally going to get what they pay for in this industry. What we try to do is find a solution that works for the client, make sure it’s expedient and crisp, and make sure the pricing is at a competitive market rate. We try to hit all three where most people can really only expect two — that’s something we try to surprise clients with.
Garwood: A few minutes ago you mentioned the Warren Buffett story and how it changed your perspective. For anyone who doesn’t know it — Buffett’s mind changed after he bought the plane, not before. Is that typical? Do most owners only really understand the value of the aircraft once they own it, or was he a unique case?
Lee: I think it’s more often the rule than the exception. There are a couple of things people misinterpret about aircraft ownership, and one is the soft goods — what the aircraft really gets you. For those who aren’t interested in status or flash, what we’re talking about is a real solution for something most people can’t buy, and that’s time. If you’re trying to be in two places in the same day, using the airlines or a rental car, you’re often not going to be able to do it — you’ll need multiple days. Having your own aircraft, or access to one, buys you time, literally. I can’t speak for Warren, but I believe that’s part of what he realized — that no matter how wealthy you are or how many buildings you own, time is something you just can’t buy. I think he probably also realized that buying an aircraft doesn’t end when you purchase it — it’s a journey through pilot training, hangar costs, insurance, maintenance, and more. There’s a real growth experience for owners getting into this, discovering both the benefits and the additional costs. But for most people, the time savings and benefits of ownership far outweigh those costs. I think that’s what the Buffett story tells us — one of the world’s most renowned investors going from a doubting Thomas to a believer says a lot about what aircraft can bring to people.
Garwood: Is there a risk to telling that story? Could buyers hear “even Warren Buffett came around” and use it to justify a purchase that doesn’t actually fit their mission?
Lee: Sure. I think there’s an attractiveness to aviation that exists in things like not going through TSA — bringing your dog, bringing motorcycles to the ranch, bringing certain materials to a job site. These are things you can’t easily do on airline travel. So yes, it could be a danger that someone hears that story and wants to buy an aircraft thinking it’ll do more than it can. But transparency and straight talk are part of our process. We’re not looking for a specific outcome — the outcome could very easily be that it’s not right for a client to purchase an aircraft of any kind, and that’s fine. What we’re striving for is education, an eye-opening experience, so any client who approaches us goes in with their eyes a little more open than before they called. That’s a success in its own right. You can’t do all the homework online — clients come to us more informed than they were even ten years ago, which is great, but our job is to round out the rest with real-world application.
Garwood: In the article, you make a point of separating luxury from value — that purchasing an aircraft is really about time, not comfort. How do you help a client put a dollar value on their own time when building the case for a purchase?
Lee: We won’t do that for a client, but we get to watch clients do it for themselves, and that’s one of the most fun parts of this job. A client coming into their first aircraft purchase has a preconceived idea of what they’re getting into. Then there’s the education process before they acquire, and the real education process after — when they’re actually using and experiencing it. That’s part of the journey, part of the awakening we get to watch unfold, and we want that experience to go well. It usually goes better when clients have more information before they jump in than after.
Garwood: For a business owner on the fence about buying an aircraft, what’s the real cost of not having one? Is it lost meetings, lost days, lost opportunities?
Lee: That’s where we want the client’s own experience to drive the answer, because a client is going to know the value of their time, both soft and hard. On the hard-cost side, you can look at what a client makes per year, divide it out per hour, and get a sense of what their time is worth. But there’s a soft cost too — what’s the value of missing an opportunity to acquire a competitor because you didn’t get there in time and a rival beat you there? What’s the value of being able to personally visit multiple business locations and still be home in time for dinner? These are tough things to put a number on, but they become self-apparent once a client owns the aircraft and starts getting access to more meetings, more opportunities, more family time. Ultimately the client has to determine that value for themselves — we just enjoy pointing out what those opportunities can look like, because aircraft ownership isn’t cheap, and clients need to weigh those expenses against the wins to family, to business, and sometimes to taxes.
Garwood: Another thing that stood out in the piece, and that you’ve touched on today, is that ownership isn’t always the right call for everyone. You point out that charter, fractional ownership, or a turboprop might beat owning a jet for some buyers. How do you have that conversation with a client who assumes they need to buy?
Lee: Some clients get it pretty quickly — there’s a dollars-and-cents aspect to this that’s black and white, you either can or can’t afford it. That can be an easy conversation or a hard one, depending on who’s receiving it. But there’s also the conversation that maybe you can’t afford the jet you wanted, but a turboprop or piston solution fits. Even within aviation, there’s a wide range of options for almost any budget — aircraft can run from twenty thousand dollars up into the hundreds of millions. On the low end, an aircraft can cost about what a large SUV costs to run in fuel and mileage. So once you know the budget, you look at the cross-section of budget versus mission, and that’s where you want to begin the search. We always recommend a client build a team around themselves — almost a self-imposed advisory board: an aviation tax expert, a trusted aircraft finance expert, and a broker who can act as a strong buyer’s agent. A good broker can save a client a big headache, either by steering them away from a bad purchase or by knowing what to look for in a pre-purchase inspection that the client would never have caught on their own. Once that advisory panel is in place, a client can feel at rest that they’re in the hands of experts who will minimize the mistakes they might otherwise make.
Garwood: When you’re looking at a prospective aircraft owner, what’s a red flag that tells you they should not own an aircraft, or at least not yet?
Lee: Budget is part of it — some budgets just scream “no, you can’t afford this.” As a strong cash-flow shop, we want to make sure the debt can be repaid, and if it can’t, that’s a conversation we have to have. But we also discuss their options if they don’t purchase — charter, fractional, even renting. If a client has a pilot’s license, renting at their local field instead of buying is a legitimate use of their resources that doesn’t get talked about much. One simple criterion is time: how many hours a year do you expect to fly? These are loose guidelines, but as an example — if you’re flying less than 75 hours a year, maybe renting makes sense. Between 75 and 150 hours, maybe you look at owning something smaller. More than 150, maybe 200 hours a year, that’s when the math really starts to make sense for ownership, possibly even fractional. Every deal is like an individual fingerprint. Maybe ownership doesn’t make sense, but fractional ownership has a tax benefit and still gets the job done. Maybe you’re not flying enough to justify owning outright. Chartering lets you try out different aircraft — the cabin, the noise, the size — before committing. And renting is probably the last option, a way to check out ownership before you buy, if you’re planning to be an owner-pilot.
Garwood: Switching to the financing side — how does a buyer’s mission clarity, or lack of it, affect the kind of deal you can structure for them?
Lee: A lack of clarity isn’t necessarily a red flag for us — we can help clarify it. It’s part of the relationship-building we do, getting into the weeds with a client on how they’re actually going to use the airplane, giving them examples, and asking if that’s something they see themselves doing. We can walk clients through things they may never have considered and help them back into a mission. For example, a client might say their mother lives in a remote part of Florida while they’re in a remote part of Texas, and there’s no good airline solution for that. For them, the value of seeing that family member might outweigh even the harder business numbers. A banker can’t tell a client that seeing their mother is worth more than going to the office — that’s a discussion, part of the relationship-building. We want clients to think through as many opportunities as possible before they buy, so they’re truly acquainted with what the aircraft can do for them.
Garwood: When it comes to deals with mission-first buyers versus aircraft-first buyers, do you see a difference over the life of the asset?
Lee: Over the life of the asset, no — because our goal is to solve for that before the purchase, so the value should hold up over time regardless. From a usage standpoint, we make sure clients know the value of engine programs. If you’re purchasing a jet, we advise being on an engine program, which levels off the ups and downs of engine ownership and smooths the overhaul process so it’s not a shock to cash flow. Those programs build real value over time — you can own an aircraft for five years, pay into the program, and come out with a nice nest egg toward future engine overhaul. Clients can also self-fund through an interest-bearing account with the bank instead. We help walk through those options so the valuation doesn’t diminish over time. The other piece is structuring the right terms and amortization. If a client is going to use the aircraft heavily every year, that puts more wear on the airframe, engine, and avionics, and the aircraft’s value — a lot of which sits in the engine — will diminish faster as it approaches overhaul. So we make sure a client doesn’t stretch out too far on an amortization schedule and end up upside down. Our goal is straight talk and sound advice to make sure the term length is the right fit for the hours they’ll actually fly on that aircraft, for that mission.
Garwood: We’re approaching the end of our time, so I’ve got one final question. If a listener takes just one question away from our conversation before they start shopping for a jet, what should it be?
Lee: It should be: how do I efficiently build a team of experts to help protect me in making this decision? It comes back to getting straight talk and sound advice from your tax advisor, your financier, and your broker — and I’ll even throw in an attorney. Not everyone uses one for these deals, but an attorney can protect a client from making a bad decision or structuring a deal inefficiently. So the question is: how do I set up that team, and how do I get good advice on doing this?
Garwood: Excellent advice. Chris, thank you so much for being on the podcast today. I hope you and your colleagues at 1st Source will come back for more conversations about equipment finance soon.
Lee: Thank you so much, Rita. I enjoyed it.
This episode is brought to you by 1st Source Bank. For more than 160 years, 1st Source has been committed to helping clients achieve security, build wealth, and realize their dreams. Its Aircraft Financing Division has provided specialized aircraft financing nationally and internationally for 40 continuous years.
