Aircraft financing

ircphoenix

ircphoenix

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ircphoenix
I live in California. We don't know what cash is. We have heard rumors of it existing, but our lives are leveraged on the day we're born.

Now that that's out of the way... anyone know of any companies that do small commercial loans for aircraft? So far I've found companies lining up to do a 40k loan for a plane... as long as it isn't for a leaseback (which I want to do). The companies willing to do a leaseback don't want to finance anything cheaper than 70k... which I don't want to do in case the airplane doesn't rent well and I'm stuck with a higher monthly bill than I'm comfortable with.

I've tried AOPA, NAFCO, and literally every other company I've seen mentioned on the boards. I'd go with B of A since they're my bank, but it appears that they no longer do aircraft financing and have sold their stuff to Commerce Bank (who is among the many I've contacted).
 
What about something local and smaller? Any local credit unions? I financed both of my planes through a small community bank, and while the rates weren't fantastic, the customer service was excellent. I'm not sure how they'd feel about a leaseback however, as that wasn't something I was doing.
 
Was tempted to go through my work credit union, but I don't have an established relationship with them already. I'd rather eliminate my big loan options before moving on to local. Local usually means less convenient for me.
 
I second the credit union recommendation. My business finally switched to a credit union, and it was night and day difference.
 
Credit Unions are great. I left the "big banks" and have been very happy with my credit union for the last 15 years.

That said... you might want to look into social lending as an option as well. Something like Sofi will lend up to $50-60K as a personal loan provided you have strong credit. Interest isn't the best, but it's not too far from aviation financing rates.
 
Call dorr aviation.
I haven't asked about leaseback but they were great to talk to and laid out tons of details about various options for me over the phone.
 
Thanks 6PC... Dorr Aviation won't do less than 75,000 financed with 30% down for a leaseback, so that would be a ~$110,000 purchase price. Been there, got denied by that. ;)

Wings Financial. I'll try them. Thanks!
 
rtk11 said:
Credit Unions are great. I left the "big banks" and have been very happy with my credit union for the last 15 years.

That said... you might want to look into social lending as an option as well. Something like Sofi will lend up to $50-60K as a personal loan provided you have strong credit. Interest isn't the best, but it's not too far from aviation financing rates.
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SoFi qualified me for 40,000 at 11% for 7 years. Kind of rough. My lowest credit card is 8.99%. Highest is 11.99%. So seeing 11% on a loan when my credit card rate is lower is offputting. The extra 3-8 years that aircraft financing offers certainly spreads the hurt out over an additional 36-96 payments. Of course it costs you in interest, but should the plane not rent, 40,000 at 7% over 15 is much more manageable than 11% over 7 years.
 
ircphoenix said:
SoFi qualified me for 40,000 at 11% for 7 years. Kind of rough. My lowest credit card is 8.99%. Highest is 11.99%. So seeing 11% on a loan when my credit card rate is lower is offputting. The extra 3-8 years that aircraft financing offers certainly spreads the hurt out over an additional 36-96 payments. Of course it costs you in interest, but should the plane not rent, 40,000 at 7% over 15 is much more manageable than 11% over 7 years.
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Try lightstream.com by Suntrust Bank. They do unsecured loans for a pretty high amount and generally don't ask too many questions. I got 15K for 4.5% unsecured in about thirty mins and the only thing they asked was what I was buying. Rates are pretty good to. I would also not use the word commercial when going to look for a loan. I think most loan people start to think you are business and are looking for some kind of business loan.
 
If you own your home you could look into mortgage on it for a $40k plane. Home equity loan and then looking at a better rate than I would expect from a plane loan with lease back provision.
 
Finance it the least expensive way. That is usually by refinancing your home. Don't own a home? Buy one,get some equity, then consider a plane. BTW, most leasebacks lose money or at least don't make much, so don't count on that working out. Home ownership, OTOH, almost always works out if you hold onto it, it goes up. Real Estate is up quite a bit right now.

If all that discourages you, get to know some pilots that own their own planes and bum rides with them. A lot of us don't mind company and help pushing the plane in and out of the hangar. You will get a taste of plane ownership by listening to them tell you stories. Its educational. Try a note on the bulletin board saying you want to ride along.
 
Not to be critical, but if you're already somewhat extended and don't have $40k cash to buy the plane, you don't really want to be in that business.
 
I have considered a cash out refinance if I find the right plane. The other option is to wait I only owe about 4 years on my mortgage. The benefits of the cash out mortgage as I see is are the rates are low. The interest is deductible. The struggle I have is the closing costs they raise the interest by about 1/2 to 3/4 of a percentage point.
 
Bill Jennings said:
Not to be critical, but if you're already somewhat extended and don't have $40k cash to buy the plane, you don't really want to be in that business.
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At 40k financed I wouldn't be all that extended... which is why i established that as my limit. I could afford more, but I'd rather be more conservative in case something unexpected crops up.

And on the point of leasebacks losing money or not making that much... I know. I'm well aware. I'm not looking to make money. Just an attempt to subsidize my own flying and hopefully break even.
 
And when you need to do an unexpected overhaul? You really want to be paying 11% on something that isn't even flying?
 
Do you have a savings account? if so, hy poth ocate. Otherwise, rent. Airplanes always cost more than you ever bargained for, especially if you go cheap.
 
EdFred said:
And when you need to do an unexpected overhaul? You really want to be paying 11% on something that isn't even flying?
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No. Of course not. Which is why 11% isn't an option, even though I've been approved for it. Thus my question here =D

I've worked the numbers all pretty conservatively. I know from my numbers what my break even point is, and I know what my flight school averages on their airframes every month. I have insurance quotes already done and plugged in. I know my tie down fees, annual, 100 hr, and 50 hr costs because I've talked to the mechanic on the field. I have a 10% per hour reserve for maintenance *aside* from the amount set aside for TBO.

I'm not looking to be an airplane tycoon with a leaseback. I'm looking to break even or to have the plane cost me less for my IFR and commercial time building than straight renting would. That's it.
 
If you go rental, you will HAVE to cough up dough for maintenance. HAVE TO NOW.
 
ircphoenix said:
No. Of course not. Which is why 11% isn't an option, even though I've been approved for it. Thus my question here =D

I've worked the numbers all pretty conservatively. I know from my numbers what my break even point is, and I know what my flight school averages on their airframes every month. I have insurance quotes already done and plugged in. I know my tie down fees, annual, 100 hr, and 50 hr costs because I've talked to the mechanic on the field. I have a 10% per hour reserve for maintenance *aside* from the amount set aside for TBO.

I'm not looking to be an airplane tycoon with a leaseback. I'm looking to break even or to have the plane cost me less for my IFR and commercial time building than straight renting would. That's it.
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I think you should recheck your math. A rental is going to be abused (not necessarily intentionally, just by ignorance) and your $40K could turn into $40K pretty easily. Doing this to "save money" seldom makes any sense.
 
ircphoenix said:
I'm not looking to be an airplane tycoon with a leaseback. I'm looking to break even or to have the plane cost me less for my IFR and commercial time building than straight renting would. That's it.
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Have you thought about/looked into any partnerships or clubs that are available on the field?
 
Buying and operating without a leaseback will be cheaper than renting if you knock out your IR and commercial within a year. Then sell it for about the same you bought for with only another 200ish hours on it from when you bought it.
 
EdFred said:
Buying and operating without a leaseback will be cheaper than renting if you knock out your IR and commercial within a year. Then sell it for about the same you bought for with only another 200ish hours on it from when you bought it.
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That..... is actually genius. I didn't even think about that!!!!!!!!!
 
I just ran the numbers for what THEY make on an 11% loan of 40,000 yearly (remember they don't make it all at once) and if you go grab an amortization calculator and run it also, you'll see why they need that interest rate so high on something that is likely to break numerous times in 15 years for large sums to repair, and many of those maintenance items that can come up, can cut its resale value literally in half.

Until halfway through the loan, they can barely afford the lawyer's time and other costs that it would take to deal with repossession if you decided to park it and walk away.

Securing the loan with something else is the only way they can make that work. And they still know they'll be paying someone to go to bankruptcy court to get it.

If you said what they wanted as a down payment, I missed it, but even calculating it as a $40,000 loan, what they're making in the first five years is too low to mess with you.

Ever see a rental make it five years without at least one big maintenance bill?

Ed's right, if you can buy it and sell it later to meet a goal, you're in better shape.

But, if you break the engine in the middle of that, you going to be able to maintain the payments and buy an engine without another loan?

Owning is a cash flow problem. If you don't have the cash to fix it, it's now worth a lot less (in the early years) than the loan is worth and you might walk... And the lender loses.

Do the math that way sometime with your numbers you were approved for and what you wanted them to be and you will see why they said no-freaking-way.
 
dp... that 11% is just a basic unsecured loan... which one lender was totally good with.

The other lenders were good with financing a 40,000 plane at 6% for 15 years with 15% down.

None of them were good with leasing it to a flight school without the purchase price being at least 70k.

But you're right. Ed's solution is so freakin' obvious I completely missed it.
 
EdFred said:
Buying and operating without a leaseback will be cheaper than renting if you knock out your IR and commercial within a year. Then sell it for about the same you bought for with only another 200ish hours on it from when you bought it.
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It's what I did :) Except for commercial of course. And I only put 135 hours on it, not 200.

Oh and I added about 30K in avionics and upgrades...ok fine..it's not at all what I did..<sigh>

But I did get my instrument rating!
 
I apologize if I missed it. I'm on my phone and skipped a lot, but have you considered a partner. I'm OCD and would not like a bunch of random strangers beating my plane. Partner cuts everything right down the middle and let's you get traditional financing.
 
ircphoenix said:
dp... that 11% is just a basic unsecured loan... which one lender was totally good with.

The other lenders were good with financing a 40,000 plane at 6% for 15 years with 15% down.

None of them were good with leasing it to a flight school without the purchase price being at least 70k.

But you're right. Ed's solution is so freakin' obvious I completely missed it.
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Makes sense... Run the amortization schedule for both. They're not making much money at all, in the grand scheme of lending.

They know an owner operated is less likely to be broken such that the aircraft (the collateral against the loan) becomes so close to worthless they end up with paying more money to recover from you, if you default, than the loan is worth.

They also know over 15 years the likelihood of a recession in the middle somewhere is high. Almost impossible not to have one by historical data.
 
denverpilot said:
Makes sense... Run the amortization schedule for both. They're not making much money at all, in the grand scheme of lending.

They know an owner operated is less likely to be broken such that the aircraft (the collateral against the loan) becomes so close to worthless they end up with paying more money to recover from you, if you default, than the loan is worth.

They also know over 15 years the likelihood of a recession in the middle somewhere is high. Almost impossible not to have one by historical data.
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I guess in my mind I already know a 180 at ~35 is going to be pretty low already, so it can't fall by a whole bunch more. But a 70k airplane has a much greater distance between the time it is purchased and it's theoretical low point.
 
Great thread, and it got me fired up about ownership. I'm thinking of taking the leap, so I called Amy at Wings to run numbers - (952) 997 8356.

They offer 84-month financing up to $50K, and 10-15 yr balloon loans on bigger deals. Best interest rate of 3.49% requires an Experian score of 760 or better. $50K financed at 3.49% over 84 months is $225/month.

Below $50K, they'll take the lower of two market analyses that you provide them to determine value. Above $50K, they want an appraisal.

For what it's worth...
 
Apparently lots of people lease back aircraft. They are either considerably more or less intelligent than myself. When I looked into it the deal struck me too much as altruism, and I owned my airplane. I can't imagine making payments on something and rating it out. I just don't see how that makes money. Then again, perhaps I'm the less intelligent one.
 
ircphoenix said:
I live in California. We don't know what cash is. We have heard rumors of it existing, but our lives are leveraged on the day we're born.

Now that that's out of the way... anyone know of any companies that do small commercial loans for aircraft? So far I've found companies lining up to do a 40k loan for a plane... as long as it isn't for a leaseback (which I want to do). The companies willing to do a leaseback don't want to finance anything cheaper than 70k... which I don't want to do in case the airplane doesn't rent well and I'm stuck with a higher monthly bill than I'm comfortable with.

I've tried AOPA, NAFCO, and literally every other company I've seen mentioned on the boards. I'd go with B of A since they're my bank, but it appears that they no longer do aircraft financing and have sold their stuff to Commerce Bank (who is among the many I've contacted).
Click to expand...
Interesting. When I bought the Twin Beech I used financing with NAFCO. I don't recall ever being asked the question about renting it out.
 
steingar said:
Apparently lots of people lease back aircraft. They are either considerably more or less intelligent than myself. When I looked into it the deal struck me too much as altruism, and I owned my airplane. I can't imagine making payments on something and rating it out. I just don't see how that makes money. Then again, perhaps I'm the less intelligent one.
Click to expand...
It's very tough to do. When I ran the numbers on leaseback when I lived in SoCal, it was very difficult to break even let alone turn a profit on a leaseback if there was any financing involved.
 
Fearless Tower said:
Interesting. When I bought the Twin Beech I used financing with NAFCO. I don't recall ever being asked the question about renting it out.
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Honestly it seems like most of the companies are like "It's personal right? *wink* Good." Don't ask, don't tell. I absolutely shot myself in the foot by saying anything about a leaseback.

NAFCO has been the easiest to communicate with. Unfortunately the commercial loan isn't an option (with an excess of 15 hours a month leaseback) but Joy Thomas there has been FANTASTIC. If I pull the trigger and end up just buying the plane for myself, I will 100% go to her first.
 
Insurance is easy. An insurance company will insure anything you want for however much you want.... provided you're willing to pay the premium. ;)
 
whereisrandall said:
Great thread, and it got me fired up about ownership. I'm thinking of taking the leap, so I called Amy at Wings to run numbers - (952) 997 8356.

They offer 84-month financing up to $50K, and 10-15 yr balloon loans on bigger deals. Best interest rate of 3.49% requires an Experian score of 760 or better. $50K financed at 3.49% over 84 months is $225/month.

Below $50K, they'll take the lower of two market analyses that you provide them to determine value. Above $50K, they want an appraisal.

For what it's worth...
Click to expand...

I think your math might be off a bit. $225 * 84 does not come close to paying back a $50k note, nevermind about $6500 in interest over that term. Unless you're putting down a substantial amount of the $50,000 purchase price in cash and financing a fraction of the agreed upon purchase price. Your math gets you a $671/month payment financing $50k @ 3.49% for 84 months.
 
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