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The Right Approach to Financing Aircraft for Business Travel

Buying an aircraft for business travel – whether new or used – demands a thorough understanding of the factors at work that could affect your purchase. The stakes are high and every purchase is different so it’s prudent to seek guidance from experienced aviation professionals including the team at AOPA Aviation Finance. Working with AOPA Aviation Finance is like having your own Aircraft Purchasing Department. Start your financing today!

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Choose the airplane based on needs rather than wants

While you might want a Citation X because of its speed, size, range and relatively reasonable acquisition cost, it may be overkill if you don’t need one if you plan on mostly flying regional trips of less than 600 nm with only 2-3 others. A new TBM or PC-12 might be a better fit with a block time difference of less than 20 minutes, good space and useful load, and plenty of range for those trips. Also, it would cost significantly less on an hourly basis and in maintenance expenses.

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Don’t get emotionally involved in the transaction

You (or your spouse) happen to really like the paint scheme and interior of an aircraft. However, when going through the pre-buy inspection you realize there’s been a quite a bit of deferred maintenance. You could be tempted to just simply deduct that from the purchase price, but you should be considering another aircraft. It’s a lot less painful to have a well-maintained aircraft, get it repainted and re-ragged than it is to hear complaints about why the plane is not available and always in for repairs.

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Hire professionals to assist you with the transaction

You might be tempted to call your Financial Advisor or Banker at one of the large financial institutions and have him/her arrange financing. Who else knows your financial situation better? Unless they have expertise in aviation, you’d be better served to reach out to an aircraft finance broker that has relationships with multiple lenders and understands which institutions are most eager for your business. They can quickly look at your financial situation, your aircraft choice and your usage and then find you the most competitive option out there.

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Don’t skip (or skimp) on a pre-buy inspection

You’ve found the perfect plane, it’s been owned and managed since new by a Fortune 500 company with an extensive flight department. It’s priced to sell and the seller’s aircraft broker is telling you they have multiple interested parties. You might be tempted to skip on the pre-buy inspection or perhaps only require airworthy items be remedied as part of your letter of intent. The only way to truly understand what costs you will be inheriting when you make this purchase is through a thorough pre-buy.

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Understanding all the acquisition and maintenance costs involved with turbine aircraft ownership

While no two planes are exactly alike, neither are the costs to maintain them. The hidden cost in that low-priced Falcon 50 is that you will be probably spending more to operate it per year than you did to buy it. Don’t assume simple percentages when trying to forecast operating expenses. Do the research to find out what the typical hourly cost of operations will be for your upcoming purchase.

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Respond to your financial advisors with your input in a timely manner

To avoid time delays due to bandwidth, delegate, delegate and delegate – have your CPA handle financial requests, have your mechanic coordinate obtaining aircraft details even contemplate having your admin oversee all your designees. Time kills all deals and costs you money! If you are unable to keep up with requests, it’s time to find others to assist you in the process and hold the seller and experts accountable to do what they say when they say they will.

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Fully understand your insurance liability limits

Work with an expert insurance broker and fully understand your coverage limits. The last thing you need to be dealing with is undue financial burden in the event of an accident. Not only will you want to make sure you are covered, so too will your lender. Know that most loan documents require proof of proper coverage and can frequently stipulate specific requirements for international travel, failing to comply could put you at risk of default on your loan agreement.

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Don’t delay on applying for financing

Don’t wait until a week or two before closing to secure financing. Not only will your options be limited, you may find you are unable to get it done in time. Even if you’ve worked with a familiar finance broker and/or lender and they know your financial situation, you might not realize this latest acquisition needs to be made with an entirely new lender.

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FAQs about Financing Single-Engine Aircraft

How can I obtain a pre-approval so I have financing in place when I find the right aircraft?

Obtaining a pre-approval is the same process as an approval with the exception of having to provide an aircraft spec sheet. You won’t provide the spec sheet until a specific aircraft has been identified. You will need to provide the lenders with a general loan amount, type and model. Once you receive the pre-approval, the rate will be locked for 30 days, and the approval will be good for 90 days.

What does a typical down payment look like?

Aircraft lenders will require a minimum down payment of 15% on aircraft newer than 1960 and 20% for older aircraft.

What should I expect in terms of timeline to funding?

Rate and loan terms will be determined largely by the loan amount. Currently, we are seeing loan terms from 5 to 20 years (20 years only available on loans of $75K and above) and rates between 4.38%-7%.

FAQs about Financing Multiengine Aircraft

What age of aircraft can I finance?

Typically, our lenders will consider multiengine piston aircraft manufacture from 1970 and newer. Some lenders will make exceptions for older aircraft.

What is a typical down payment?

Depending on the age of aircraft, minimum down payments can range from 15% to 30%.

What terms should I expect?

Most lenders will finance multiengine aircraft for maximum terms of 10-15 years.

FAQs about Turbine Finance

What age restrictions will aircraft lenders have on turbine aircraft?

Our lenders can provide financing on turbine aircraft from 1980 and newer.

Will lenders require a turbine aircraft to be on an engine program?

Yes, most of our lenders will require an engine program. Some exceptions may be considered.

What should I expect in terms of timeline to funding?

Generally, you can expect the process to take about 30 days from start to finish.

Are there any usage restrictions?

Part 91 and 135 usage is considered acceptable to our lenders.

What terms can I expect?

Lenders will base their terms on the age of the aircraft. Standard terms will be 15 year amortization with 5 year term.

What does a typical down payment look like?

Lenders will determine down payment based on aircraft year, make and model, and could be as low as 10%.

Will the aircraft need to be filed with the International Registry?

If the airframe and/or engine qualifies for the IR, most lenders will require that it be filed.

Have additional questions? Feel free to contact us or call us at 800.627.5263.