Navigating Financing for a New Airplane: How to Plan for Delayed Deliveries and Secure Your Loan

Purchasing a new aircraft directly from the manufacturer is a special thrill few owners get to experience.  If you are considering buying new directly from the factory, there are a few things you should consider to make sure the purchase and delivery go smoothly. For most aircraft transactions, planning the process up front will make a significant difference in how things turn out in the end. This is especially true when financing an aircraft that is new from the factory.

Timing is one of the major considerations. If you are planning to order an aircraft from the factory, be sure to inquire about the current manufacturing and delivery schedules. Once you know these schedules, AOPA Finance can then coordinate with you to determine the best time to complete the application and get an approval in place.  Many aircraft manufacturers have a current backlog spanning from six months to well over a year. In many cases, financing approvals are valid for up to 90 days. When there is a mismatch between the approval and delivery timeframes, we normally recommend one of three options. 

Option 1: If you are looking for confirmation that you are approved for financing while your aircraft is being built, you can apply for approval before you place the order.  Once approved, you can confirm the order, and then we can work with you to refresh the approval every 90 days until the delivery date. A refresh normally doesn’t require all the same documentation as an initial application, but it does include a credit check each time the approval is refreshed. For those who are concerned about the number of inquiries on their credit report, option two or three may be preferable.

Option 2: Instead of refreshing the approval every 90 days, you could apply for an approval up front to confirm eligibility, and then once the delivery date is within 90 days, apply for approval again. We can coordinate with the lender to let them know your plans, and as long as there aren’t any material changes to your financial situation, the lender should be able to issue a subsequent approval closer to delivery.

Option 3: For those who are confident in their qualifications, a single application for approval within 90 days of delivery could work as well.  If this is an option that appeals to you, we recommend having a conversation with one of our representatives early in the process to confirm the requirements for qualification. Having this conversation early will allow you to plan for an approval in the future and make any changes necessary to ensure a positive result.

Another major consideration is how and when the manufacturer requires payment for the aircraft. It is common for manufacturers to require a deposit when you place an order for a new aircraft. Deposit amounts vary but are usually between 10% and 20%.  Lenders will typically finance up to 80% or 85% of the purchase price for new aircraft, so the deposit may cover your 15% to 20% down payment on the loan.  

In addition to a deposit, some factories also require progress payments at certain milestones during the aircraft build. There could be up to three or four payments required to complete the aircraft, including the initial deposit and a final payment at delivery. Aircraft lenders are typically not able to finance progress payments, so there are a couple of options to consider here.

Cash. If you have cash reserves that cover the deposit and progress payments, you can use those funds to satisfy the manufacturer’s payment requirements. Once the aircraft is completed and ready for delivery, the lender can provide the remaining funds to complete the purchase and reimburse you for any personal funds used, up to 80% or 85% of the purchase price.

Short-term financing. You may have access to non-standard financing options that would allow you to satisfy the payment requirements for your aircraft build. These options could include business or personal lines of credit or using something you currently own as collateral for a short-term loan. Most aircraft lenders don’t step into this arena, so these options would come from other lending relationships you currently have. Once the aircraft is completed, the lender could refinance your short-term financing into a standard aircraft loan.

The final consideration is flexibility. Supply chains, factory schedules, and training schedules are complex and often change. We have seen delivery dates pushed back due to manufacturing delays, and dates moved up due to order cancellations. In any case, when purchasing a new aircraft, it’s important to keep in close contact with the manufacturer and with the lender so that any changes in the anticipated delivery can be addressed as quickly as possible.

When working with AOPA Finance, we’ll walk you through the steps needed to make sure your new aircraft purchase is a success.

Great advice. Great rates. Helpful and responsive reps you can trust. Three good reasons to turn to AOPA 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.