percentage of Aircraft price financed.

[AdamZ]

Is there a standard percentage of the purchase price that owners ususally put down on the plane and then finance the rest? For example in Real Estate it was ( operative word being "was" ) customary to put down 20% on the purchase of Real Estate and then get a loan for the remaining 80%. Assuming of course you can't or don't want to buy it outright.

 

[Dave Siciliano]

Just depends on the market, plane and what the lender looks at Adam. Some lenders primarily look at earnings( cash flow ). Cessna, AOPA and many finance companies tend to focus here. Ten percent if you're strong; prefer twenty percent. I've had 100% offered.

Some look at total assets--that's where I went. They tend to be banks.


Best,

Dave

 

[Dean]

That depends on the finance company, some require 20% down, but some will take the purchase price vs. the value and go from there. My bank did 100% of purchase because I bought it 15K under appraised value. Some will also work with you on the term, 10-25 years.

 

[rmciottijr]

Adam I need to talk to your Bank only 40% and the wave the 60% lol

 

[AdamZ]

So it looks like most folks finance the plane through an aircraft loan vs. say a home equity loan. What are the rates out there on an aircraft loan. We can get HELOCs here for as much as 1.26 below prime and its decuctible.

 

[alaskaflyer]

So it looks like most folks finance the plane through an aircraft loan vs. say a home equity loan. What are the rates out there on an aircraft loan. We can get HELOCs here for as much as 1.26 below prime and its decuctible.

1. Not all of us own a home. At the moment I don't due to job requirements though I have owned two in my life.

2. Many of those that do, do not have near enough equity built up to even dream of financing something as expensive as a plane through that route.

If I did own and I had enough equity I would have gone that route - many advantages over a simple airplane loan. For one thing you could probably get around some of the more onerous requirements on the typical airplane note such as mandatory insurance coverage etc etc

My financing required 20% down but would go 12 years on a '55 model. I put a bit more than that down. Locked it in at 6.75%. Pay almost as much in monthly insurance costs in this state than I do on the bank payment.

 

[AdamZ]

Good point Richard. I asked about the HELOC only b/c it seems a less expensive route I thought the rate would be better but 6.75 is not a bad rate. That being said If for some reason you default It would be better for them to take the plane than your home.

 

[Bill]

That being said If for some reason you default It would be better for them to take the plane than your home.

If you're buying a plane yourself, you have the options above. In a partnership, most want it such that each partner brings cash to the table, thus allowing the corp to own the plane outright (no lien). How each partner gets his cash to the table is his business.

 

[alaskaflyer]

Good point Richard. I asked about the HELOC only b/c it seems a less expensive route I thought the rate would be better but 6.75 is not a bad rate. That being said If for some reason you default It would be better for them to take the plane than your home.

Having read other threads on the red board the consensus is that HEL are generally the better bet, though I have to say again that there aren't really that many people in the middle class anymore that have any equity built up in their houses, at least not in my age group

Also some guys were claiming some pretty sweet interest rates on a conventional airplane note - made me want to know what their credit score was or if they had a father-in-law on the bank loan committee

Some people say only pay cash or don't own. I call BS on this: an airplane - or more accurately a used airplane that has seen most of its depreciation come and go already - is like any other investment and if one can finance at a rate low enough then there are likely better ways to make your cash work for you than tying it up in airplane equity.

 

[alaskaflyer]

If you're buying a plane yourself, you have the options above. In a partnership, most want it such that each partner brings cash to the table, thus allowing the corp to own the plane outright (no lien). How each partner gets his cash to the table is his business.

Which means a HELOC is quite an attractive prospect in this scenario, since I would imagine most lenders would be loathe to lend a partner needed funds under any other product except an unsecured note with a correspondingly (and astonishingly) high interest rate.

 

[Bill]

Some people say only pay cash or don't won. I call BS on this: an airplane - or more accurately a used airplane that has seen most of its depreciation come and go already

Concur. In fact, barring anything that totally kills GA, I think planes will continue to appreciate in value. New planes are certainly not getting any cheaper.

 

[AdamZ]

Plus interest on a HELOC is deductible

 

[Dave Siciliano]

Another consideration is some states is the Homestead Exemption. As a RE developer, it's better to have the Homestead lien free (at least of attachable liens).

The risk of many home equity loans is the rate floats and the home can be taken if there is a default, but you know all that.

Best,

Dave