Category: Aircraft Loans

Let’s face it. No one enjoys going to a crowded airport, waiting on passenger planes that may be delayed, and then dealing with the noise and frustration during the trip—even when you’re in first class. It is no wonder that more individuals are turning to private aviation with their own pilot and crew to get where they need to go faster and with less stress. If you are considering purchasing a private aircraft, such as a jet, you should know that financing it can be a complex process. There are several financing options available, though, so you should find one that suits your needs.

What is a Personal Aircraft?

First, let’s define what it means to have a personal aircraft as the size and maximum takeoff weight can impact your loan to some degree. There are generally three types of private jets, categorized based on their maximum takeoff weights:

1. Light Jets: These are the smallest and most economical private jets with a maximum takeoff weight of up to 10,000 pounds. These can either be single- or double-engine, typically carry up to 4-6 passengers, and have a flight range of up to 1,500 miles. Examples of light jets include the Cessna Citation M2 and the Embraer Phenom 100.
2. Midsize Jets: These are larger and more spacious than light jets with a maximum takeoff weight of up to 20,000 pounds. Domestic midsize or super midsize jets can typically carry up to 8-10 passengers and have a flight range of up to 3,000 miles. Examples of midsize jets include the Gulfstream G150 and the Bombardier Learjet 60XR.
3. Heavy Jets: These are the largest and most luxurious private jets with a maximum takeoff weight of over 20,000 pounds. Heavy jets can typically carry up to 10-18 passengers and have a flight range of up to 7,000 miles. Examples of heavy jets include the Gulfstream G650 and the Bombardier Global 6000.

It’s important to note that the maximum takeoff weight and passenger capacity can vary depending on the specific model and configuration of the private jet.

Similar to financing a car or boat, the age, make, and model of the aircraft can influence your financing options and terms. Generally, lenders are more willing to finance a newer, small aircraft than one that is older with plenty of mileage.

 

 

The Best Ways to Finance a Personal Aircraft

Now that you know what qualifies as a private jet or personal aircraft, let’s take a look at the ways to finance your purchase.

 

Asset-Based Aircraft Loans

One of the most convenient options is an asset-based or secured aircraft loan. An asset-based loan means that, if you default on payments, the lender will be able to repossess your small aircraft. However, no further compensation would be required.

In an asset-based loan, the value of the asset being used as collateral (in this case, your aircraft) is a key factor in determining the loan amount and interest rate. In the case of an aircraft loan, the lender will typically require an appraisal of the aircraft to determine its current market value and may use this value to determine the loan amount and interest rate. Creditworthiness also plays a role in this.

One advantage of an aircraft loan is that you can typically secure a lower interest rate than you would when purchasing a private jet or other small aircraft with a personal loan or credit card. Similar to the financing you use when purchasing a boat, car, or house, this loan comes with a floating or fixed rate. An asset-based loan is generally structured to have short or long-term repayment options. You may be able to secure a short 30-month loan term or one as long as 120 months. In some cases, the loans have amortizations up to 240 months.

That said, if you go this route, you will be faced with very high interest rates, particularly with longer windows for repayment.

Credit-Based Aircraft Loans

For those with exceptional credit, you may select a credit-based loan instead of an asset-based loan. This kind of loan is where the lender determines your eligibility based on your creditworthiness. Creditworthiness is a measure of how likely you are to repay the loan on time and in full. It is determined based on several factors, including your credit score, income, debt-to-income ratio, employment history, and other financial information. Typically, a credit-based loan will cover about 90% of the aircraft’s assessed value. There have been some situations where individuals with outstanding credit are covered up to 100% of the personal aircraft’s value.

The interest rate you are offered on a credit-based loan depends on your creditworthiness; if you have a higher credit score, you typically qualify for lower interest rates.

Keep in mind that these kinds of loans can be secured or unsecured. Be sure to read the loan terms.

 

Aircraft Leases

Another option to finance a private jet is through a lease. With an aircraft lease, you make payments to use the aircraft for a set period of time, typically three to five years. At the end of the lease, you can choose to purchase the aircraft, return it to the lessor, or renew the lease. Aircraft leases can be a good option if you don’t want to commit to owning an aircraft long-term.

There are two kinds of aircraft leases: non-tax lease and tax leases.

A non-tax lease means that the lessee, you, owns the private jet for tax purposes. This is useful for when the value of the craft depreciates.

A tax lease, on the other hand, is when the lessor owns the private aircraft and, thus, is the one who reaps any tax benefits gained from depreciation. With tax leases, the interest rate is usually lower than with a non-tax lease.

 

Looking For an Aircraft Loan?

Now that you know the financing options available for personal aircraft—traditional loans, asset-based loans, leases, and personal loans—take some time to consider your budget, as well as the costs and terms of your options. If you are looking for a flexible asset-based or credit-based loan with the best rates available, contact Atlantic Horizon Capital today. Our loans are unlike those from a traditional bank, because we get you the most competitive terms and interest rates.

 

Owning a private plane gives you a sense of freedom and independence to go wherever you want, whenever you want. It’s the best way to see the world and conduct business. Yet, before a financial institution is comfortable giving you a loan for a private aircraft, they will first seek to understand whether you have the finances to cover the loan payments and operating costs of the aircraft. How do you know how much airplane you can afford? Let’s go over some of the factors that determine which type of aircraft you should purchase.

 

The Cost of a Private Jet and Other Aircraft

 

The main question to consider is: how much income is required to make the purchase? In 2011, President Obama created a stir when he said that someone making around $250,000 a year could own, operate, and charter their own private jet. That is not true. Even without factoring in inflation, the cost of buying a small aircraft or jet and operating it is a far greater investment.

On average, a used jet costs between $200,000 and $500,000, though some may be $2 million or greater. That being said, you most likely want a brand new aircraft—one fitted with the latest technology and comforts. In today’s market, most jets cost within the range of $5 million to $30 million, though models can fall outside of this range. According to the 2022 Aircraft Bluebook, the 2022 Gulfstream G700 starts at $78 million. If you were hoping to purchase your own version of AirForce One, you would need $660 million.

Download Gulfstream’s G700 Brochure

To better estimate your budget, take a look at the costs of an aircraft based on passenger size.

 

Domestic Light Jets (Up to 6 Passengers)

 

Convenient and cost-effective, light jets are used for those short trips between New York and Chicago or London and Paris. Light jets also make the weekend trip to the Caribbean all the more pleasurable.

Examples include:

• HondaJet Elite S – $5.4 million
• Cessna Citation M2 Gen 2 – $5.85 million
• Embraer Phenom 100 – $4.5 million

 

Domestic Midsize Jets (Up to 12 Passengers)

 

Midsize jets offer many of the same comforts as heavy jets but lack some versatility. These aircrafts are ideal for transcontinental flights or day trips for business.

Examples include:

• Cessna Citation XLS Gen 2 – $15.5 million
• Embraer Legacy 450/500 – Pre-owned costs around $16.2 million
• Embraer Praetor 500/600 – New ranges between $16.9 million to $21 million

 

International Heavy Jets (Up to 19 Passengers)

 

Heavy jets offer everything you need in terms of space for people and cargo. These aircrafts have excellent versatility when it comes to comfort, size, and range.

Examples include:

• Dassault Falcon 7X – $37 million to $58 million, depending on the year
• Bombardier Global 7500 – $75 million
• Gulfstream G550 – $15.5 million for the 2003 model and $41 million for the 2020 model

 

Other Variable Fees That Increase The Cost

 

Aircraft cost aside, next you must factor in the operating costs such as fuel, hangar space, insurance, administrative fees, pilot and flight crew. Let’s say you have a double-engine private jet that operates around 200 hours per year. You could end up paying over $1 million per year to use your aircraft.

There are also unforeseen repairs, such as blown tires which cost around $2,000-$3,000 to replace.

 

Putting Together the Financing

 

When it comes to purchasing and owning a private aircraft, the main goal is that you enjoy it. Consider the purpose of the jet. Do you plan on long international flights that take you from the US to Tokyo in a day? Will you need more than a pilot and a couple of crew members to operate the plane? What features in the vessel itself would you need to make it a worthy investment?

There are many different aircrafts to choose from, and so it is important to weigh the costs of the models that interest you with their initial price tag, depreciation, and operating costs.

One of the best ways to ensure that you always have the finances available for operating costs is to secure a loan. Getting a loan for an aircraft is similar to how you would obtain a loan for a home or a yacht, as you can choose between asset-based aircraft loans and credit-based loans.

The financial institution that you choose for your aircraft loan will consider several factors to come up with a monthly payment, including:

• Credit score
• Debt-to-income ratio
• Down payment
• Interest rate
• Estimated hours per year of use
• Make, model and condition of the plane

 

Offsetting The Cost With Chartering

 

If you would like to offset some of the operating costs to make owning a slightly larger private jet more affordable, you may consider chartering your aircraft to others whenever you are not using it. To charter a private jet costs roughly $1,300 to $3,000 an hour for an executive light jet; $3,000 to $5,500 an hour for a domestic mid-size or super medium jet; and $6,000 to $11,000 an hour for a heavy jet.

To put that into perspective, a round trip flight on a light jet from New York to Orlando will cost at least $20,000. As such, this is an excellent way to recoup some of the operating costs and pay down your loan without diminishing your enjoyment of your private craft.

 

Looking For a Flexible Aircraft Loan?

 

Determining how much of an airplane you can afford comes down to the overall cost of the craft, including the operating fees, and the loan that you secure. As such, your budget and creditworthiness plays a role in what you can and cannot afford. You have the option to make private jet ownership even more affordable by chartering it whenever you are not using the aircraft.

At Atlantic Horizon Capital, we offer flexible loan options to make owning the private jet of your dreams easier than ever. Whether you hope to own a brand-new plane or upgrade to the latest model, our team can help you find the best loan to suit your unique needs. Apply for your aircraft loan today or contact us with your questions.

As you may already know, aircraft loans are slightly different from other types of loans. Since aircraft are specialty assets, they are subjected to specific laws that many traditional lenders do not understand. There is good news if you are looking to finance your next aircraft purchase. Atlantic Horizon Capital is here to help with our complete guide to financing your aircraft.

The Aircraft Purchase Process

Before applying for a loan, you should know how these transactions differ from other loans. First, the parties will sign a Letter of Intent (LOI) as the buyer places a deposit on the aircraft. The LOI will often contain the basic payment terms and a description of the aircraft. Many parties will use a title company or law firm to act as an escrow agent for the deal.

Remember, many of these sales are purchased on an “as-is” basis. If you are buying an aircraft, it is vital to get an inspection of the asset. Most buyers will arrange an inspection to conduct a mechanical and visual check of the aircraft. If there are any issues with the aircraft, the buyer can request the seller to correct any problems before closing on a sale.

At this time, the escrow agent will search for any lien against the aircraft. If there are any liens, the seller must satisfy them before the sale can proceed. With help from the escrow agent, all the closing documents are prepared and executed.

After that, the parties will attend a closing where the documents are released and filed. Unlike a real estate transaction, these closings are usually handled remotely. Once everything is finalized, the buyer will have possession of the aircraft.

Before you can think about finalizing a deal, you need to find the right financing for your aircraft.

What Are Typical Aircraft Loan Terms?

Certain financial methods are used to qualify borrowers for an aircraft loan. First, you will want to find a reasonable interest rate for your loan. The interest rate will affect the amount of the loan. Most lenders will look at the buyer’s credit score. With these loans, the terms are usually at a fixed-rate basis rather than a variable rate. However, you may still find a variable rate for your aircraft loan.

Down payments are usually required for an aircraft loan. For many business and private aircraft, a typical down payment is around 15%. The lender could reduce the down payment to 10% if you have exceptional credit. The down payment requirement could increase to 30% for those with poor credit. The down payment can even affect your terms. A higher down payment will usually give you a longer term on your loan.

Many times, the amortization period and terms are different lengths. In some situations, balloon payments may be required after a specific time. For example, an aircraft loan with a 20-year term could require a balloon payment after five years. Many newer aircraft will have terms up to 20 years, while older planes may only have loans with 10 to 15-year terms.

As you imagine, all those factors can affect the monthly payment. These loans are similar to a home mortgage. Most of the interest will be paid upfront, meaning you will not gain much equity during the first years. Some loans do not have prepayment penalties, which means you can pay off the loan without any fees.

What Can Affect Your Aircraft Loan and Purchase Price?

The type of aircraft will make a difference in the terms. Some older aircraft do not qualify for the best rates, but those newer models can find the ideal terms. The purchase price is another factor that can directly influence the type of financing. Some loans can be spread out over several years, helping to lower your monthly payments.

Along with that, the installed equipment can affect your terms. The age, quality, and type of installed equipment will influence the purchase price. New avionics could boost the price even if you purchase an older aircraft. On the other hand, outdated and older equipment could lower the aircraft’s price since they will have higher maintenance costs.

All aircraft will have records that show responsiveness to the FAA’s Airworthiness Directives. Also, there should be complete maintenance records for the asset. You will want to examine the craft’s airworthiness certificate, equipment lists, airframe and engine logbooks, flight manual, and weight and balance data. If anything is missing, it needs to be reflected in the sale price of the aircraft.

Finally, the damage history will affect the price of the aircraft. You will want to review the type of incidents and accidents associated with the plane, repair details, and whether there is any major impact on the components. Any pre-purchase inspection will take a close look at the history of the craft to ensure it conforms to all FAA practices and regulations.

The Approval Time and Terms of Aircraft Loans

Many people are accustomed to closing on a car loan in a few hours. That is not the case with an aircraft loan. In many instances, it could take at least a few days to finalize a simple loan. Expect more time to process the loan if you have complex financing terms. Typically, the longest financing term for an aircraft loan is 20 years, but you may only finance older aircraft for 10 years.

Credit Scores and Aircraft Loans

Like most types of loans, the credit score is extremely important. The credit score shows that you will make the payments on time and can help you get a lower interest rate.

Understand the Basics of an Aircraft Loan

Now that you understand these loans better, you can find a provider to give you the best rate and terms. Aircraft loans are different from other loans, and you will want to work with an experienced company to help you choose the right financing option for your next purchase. Contact Atlantic Horizon Capital today if you are ready to apply for an aircraft loan.