What Fees are Involved in Aircraft Loans

One of the primary advantages of using AOPA Finance as your broker is that we do not charge a brokerage fee for our aircraft loans. That service is included as part of your membership.

However, there are other costs associated with an aircraft loan in general. They include closing costs; escrow; title search fees; broker’s fee (if you don’t go through AOPA Aviation Finance); CPA/legal fees to correctly set up the ownership structure and understand the tax liability of aircraft ownership; pre-purchase inspection fee; and aircraft appraisal fee.

All lenders issue a closing cost, typically a few hundred to a few thousand dollars. That cost is determined by the size of the loan and the aircraft type. The actual cost varies from lender to lender. In the case of piston aircraft loans, it’s usually a flat, fixed fee. Turboprop and jet closing costs tend to be a percentage of the loan. In all cases, documentation, processing and aircraft valuation costs are folded into those closing costs.

Whenever a loan has to be customized, plan on the closing cost being customized, too, as it must still cover the extra work, and all perceived risks associated with the aircraft, the borrower and the loan amount.

Most lenders are going to require an escrow company to handle the transaction and a title company to research the aircraft title’s history for “cleanliness.” “Cleanliness” means each time the aircraft was sold, that transaction was correctly filed with the FAA. It also means there is proof that there are no liens against the aircraft, and if there were, they were satisfactorily discharged.

Each of these services has a fee associated with it. The good news is these fees are often split—by mutual agreement—between the buyer and the seller. That’s because it’s to the advantage of both sides of the transaction to have a clean title and paperwork correctly filed with the FAA.

A broker fee is standard policy, if you choose to use a broker other than AOPA Aviation Finance. Brokers are valuable in that they help find you the right aircraft for your mission and then negotiate on your behalf. AAF also does that as part of your membership. If you are using a broker, it’s very important to establish upfront whether they charge a flat fee for their services or a percentage of the aircraft’s sale price. And make sure you get the cost in writing.

It’s also important to remember none of these fees can be rolled into the loan amount. Almost always, lenders only finance the appraised value of the aircraft, minus 15%-20%. This means you will need to come up with all of the non-covered loan costs in addition to the down payment.

And that’s before taxes. Even though the aircraft amortization schedule has been revived at the federal level, it does not apply at the state level. Every state handles these differently. In most cases, states that do have taxes associated with aircraft transactions are going to find a way to collect, regardless of what you do. We highly recommend reaching out to your CPA or financial planner, to make sure that you’re making smart moves when it comes to the structure of the ownership and the intended use of the aircraft.

Important caveat: Lenders and CPAs and attorneys don’t always see things the same way. So it’s important to understand what your structure is going to look like before you are approved for financing, so you can communicate that clearly to the lender.

AOPA pilot protection services staff can assist members. You have access to our legal services plan and a nationwide panel of aviation attorneys. That’s a great place to start.

Great advice. Great rates. Helpful and responsive reps you can trust. Three good reasons to turn to AOPA Aviation Finance when you are buying or refinancing an aircraft. 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.