aircraft financing

[Dan]

I know nothing about how you go about financing for an aircraft. On an aircraft worth $25,000 what is a typical term length, 5 or 10 years? and what is a typical interest
rate and payment.
What agencies handle this type of loan?

[wxwatcher]

Dan,

Tyr your local credit union or a bank. Aircraft are usually treated like recreational vehicles and would typically by limited to 7 to 10 years depending on total amount of the loan and the age of the aircraft.

One of the credit unions I belong to nas a current 9%/10 year loan on that amount, but that may not be the norm.

Jerry

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Comments and opinions are my own and do not reflect those of my employer.

[djschaut]

Dan,
Did you want to pay anything down, or nothing down? The finance company that finances something like 90% of all general aviation aircraft in the US is Cessna Finance Corp, or CFC. It is located in Wichita, but the phone number I have I think is in CA: 316-729-0890. I've financed four aircraft through them. The typical term is eight years. MBNA has been getting into the segment and goes to 15 years maximum. Also, you can find the website for Greentree Financial Services at www.aso.com/ They have an ad there. Cessna Finance Corporation will pay 85% of THEIR ESTIMATE of the value of the plane. Your job is to find an airplane that they value higher than the asking price--to decrease your down payment exposure. First, find and aircraft with its spec sheet. REMOVE THE PRICE FROM THE SPEC SHEE BEFORE FAXING IT TO CFC. Submit it to CFC with your application, and one of their financing officers will call you back with the loan amount they will go on the plane. It will either be over or under the asking price of the plane. CFC calculates how much they believe the aircraft is worth on the retail market using airframe time, avionics, engine times, damage, etc. They don't use the blue book. Usually, CFC will pay a higher percentage of the 'asking price' than 85%, because they estimate the plane to be worth more than the asking price. Once you send them an application and establish a relationship, you can send additional spec sheets of planes you may want to buy. However, they prefer that you initially submit the plane you actually want. So, you need to find a plane that has the features you want for what you believe to be a low asking price. Of course, once you get CFCs loan amount, you can go back to the seller and offer less.
If CFCs loan amount it the same as the asking price, you don't need any money down. CFC will pay the dealer or seller directly, and you have your plane. If CFCs loan amount is less than your final selling price, you need to bring some money to the closing. You won't take any cash out if CFC would finance more than the asking price using their calculations. The least I've borrowed from them was $33,000, and the most $130,000. Expect an interest rate of about 9%. Once you finance an airplane with them, it's easier to do it again, but they really don't like making short term (one year or less) loans. They prefer you keep the plane for awhile.
Now, an aircraft loan is called a 'mortgage' just like the loan on your house. So, you can use a home mortgage calculator to get your payment amount. There is a mortgage loan payment calculator available through www.mortgageloan.com/cgi-bin/aprcalc.cgi Don't put any points in, just your estimated loan amount, years, and interest rate. It will show you your payment. Or, use a financial calculator.
If your credit is good, your plane is in good shape and priced reasonably, you can be flying your own bird soon. Airplanes are like boats--you're not buying just the airplane, you're buying the right to maintain it--which can be as costly as the mortgage.

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DJSchaut

[djschaut]

Dan,
I just used the mortgageloan.com site to get your payment for a $25,000 loan, 9% interest, for a term of 8 years. Your payment would be $366.26.

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DJSchaut