Question: What are your thoughts on loans for fractional ownership versus co-ownership?
Answer: It’s not uncommon for people to mistake fractional ownership with co-ownership and not recognize the significant differences.
Fractional ownership, where there’s a fractional management provider like NetJets or Planesense and the company flies and maintains your “share” of the aircraft, have very limited financing options. The reason for this is that lenders are rarely able to fully secure their collateral interest in these loans. Also, making things challenging is they must assess both your personal financial situation as well as the financial health of the fractional operator. For the strongest fractional providers there are some options, however, financing is limited and you can expect terms of no more than five years. As an aside, if you anticipate flying more than 25 hours annually, fractional ownership can be a very cost-effective way to gain access to larger aircraft…just don’t expect to be able to fly the plane!
Co-ownership is frequently what people mean when asking about fractional ownership. If you are looking to purchase an aircraft with multiple partners, this is more commonly regarded as a partnership loan. The good news here is that there’s a lot more financing options. Lenders are comfortable financing partnerships with up to four members using standard loan structures amortized up to 20 years. Beyond four members, lenders will typically only find comfort if the partnership is operating as a flying club. We have plenty of flying club options as well, however, those typically require a larger down payment and a shorter amortization.
Have questions for Adam? He is happy to answer them. Submit your questions here.
Great rates. Great terms. Helpful and responsive reps. Three good reasons to turn to AOPA Aviation Finance when you are buying an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.
Have a specific aviation finance question you would like to see in future articles? Submit it here, and it may be highlighted in an upcoming content piece.