The question is how many times and how that will influence the aircraft market. Currently, the Fed is signaling between two and five rate hikes, with an initial rate hike of potentially 50 basis points (half a percent). Forecasting Fed rates is like reading tea leaves—at best you’ll end up with a wet finger. Worst case, you’ve spilled tea in your lap. That said, AOPA Aviation Finance (“AAF") forecasts a 1% to 2% overall hike by the end of 2022.
Currently, large aircraft loans are seeing interest rates in the low 3% to mid-3% range. Rates could therefore rise into the high 3s to low 4s. In the owner-flown, piston world, where present-day numbers are in the low to high 4s, rates could edge into the low 6% range.
Aircraft loans for under $100,000 are already in the 6% range, so we anticipate them staying there for the time being, possibly all year. This is partially due to the net interest margin gain being inconsequential for smaller dollar lenders. That’s some solace for low-end buyers.
On the amortization and terms side of the ledger, we anticipate those parts of loans will remain consistent with recent history. Typically, that means loans for smaller, less complex aircraft are looking at terms of 15 and 10 years, an 80%-85% advance rate, and up to a 20-year amortization on single engines. Turbine equipment loan terms and amortization continue to be age-dependent, along with how sophisticated the aircraft is and the mission profile prescribed by the prospective owner.
Great advice. Great rates. From helpful and responsive reps you can trust. Three good reasons to turn to AOPA Aviation Finance when you are buying or refinancing an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (800.627.5263), or click here to request a quote.
