Jet financing: 3 ways to finance the purchase of a private plane
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Buying a jet is not something most people can afford to do with cash. Private jets cost between $3 million and $90 million on average, according to data from Honeywell, so it’s easy to see why per-jet financing is necessary for most consumers who want their own jet.
Keep reading for more information on how jet funding works, some jet funding options, and how to get jet funding.
If a private jet is out of your price range, it is possible to purchase a smaller personal aircraft, such as a Cessna, for a few hundred thousand dollars. You can use Credible to compare personal loan rates from lenders who offer personal loans up to $100,000.
How Jet Funding Works
It can be difficult to achieve, but if you want to finance a jet, you can find a lender to help you realize your dream of owning one. If it’s so hard to get financing for a jet, it’s because you’ll have to borrow a lot of money (think millions of dollars) to buy a jet, whether new or used. Since you will need to borrow such a large amount, it can be helpful to work with a lender you already have a relationship with, such as a bank that already knows your financial situation.
In some cases, you may be able to purchase a secured personal loan backed by personal assets that reduce the lender’s level of risk. Some lenders even specialize in jet financing and offer loans specifically to purchase jets. Note that financing a jet often requires a minimum down payment of 15% to 20%.
3 ways to finance a jet
When it comes to jet financing, you’re most likely to come across these three borrowing options:
1. Traditional loan
Similar to traditional personal loans that you might use for small purchases, like cars or boats, traditional airplane loans come with fixed and variable interest rates. In some cases, jet financiers will offer hybrid interest rates that allow you to lock in your rate, benefit from early repayment and avoid interest rate hikes.
Aircraft loans can have repayment terms ranging from 30 months to 120 months, with amortizations as long as 240 months. Remember that the longer the term you choose, the higher your interest rate will likely be.
Although you cannot get jet funding through Credible, you can use Credible to compare personal loan rates from various lenders.
2. Loan on assets
Asset-based loans are a convenient jet financing option because you won’t have to submit years of tax returns or K-1s to qualify for financing. Asset-based loans require limited personal guarantees, and sometimes no personal guarantees, which is a big plus if you’re buying a jet for business purposes. Asset-based loans are also a non-recourse form of financing, so if you fail to repay the loan, the lender has the option of repossessing the jet, but they cannot seek further compensation from you.
3. Aircraft rental
Leasing instead of buying a jet can be a more reasonable financing option, especially for companies looking to purchase a jet. Renting instead of buying can help solve cash flow problems and has certain tax advantages. You will find two main types of aircraft lease agreements:
- Non-tax leases — In this case, you (the renter) own the jet for tax purposes, which can be advantageous when the value of the jet depreciates.
- Tax leases — For this type of lease, the owner of the private plane (the lessor) is the one who owns the jet and reaps the tax benefits in terms of depreciation of the plane. For this reason, you can usually get a better interest rate.
Where to get financing for jet
You have a few options for jet financing. Many aircraft buyers start with a financial institution with which they have an existing relationship, but this is not a requirement.
- Traditional banks — Your current bank is a good place to start your search for jet funding, as they already have a full portfolio of your financial information, which can make the loan process more efficient.
- Banks with Aircraft Finance Groups — Not all banks offer jet financing, but your bank may be able to put you in touch with another bank that has a dedicated aircraft finance group with a vested interest in private jet financing.
- Private Lending Groups — This type of lender raises capital on the stock markets to support its portfolio growth and offer jet financing. This option is less common, but may be better suited if you don’t want to work with your main bank to get funding, or if your bank doesn’t offer jet funding.
How to qualify for jet financing
Eligibility for funding per jet, like a big one Personal loan, is tantamount to qualifying for more common types of financing. You will need to meet the lender’s requirements for a down payment, your credit score, and income. You may also need to show proof of funds for future payments in the form of available liquid assets and provide the lender with tax returns, business financial statements, and personal net worth information.
If you’re ready to apply for a personal loan to finance a major purchase, use Credible to quickly and easily compare personal loan rates.
How to Choose a Jet Finance Lender
When selecting a jet finance lender, ask these questions during the process:
- Do you have an existing relationship with the lender? Although a lender with whom you already have an existing relationship is not guaranteed to offer you the best rates and terms, it may be easier to obtain financing through them.
- Does the lender know the FAA requirements? You want to work with a lender that is up to date with Federal Aviation Administration regulations.
- Does the lender specialize in aircraft financing? Although not essential, it may be helpful to work with a lender who has credentials from key trade associations, such as the National Business Aviation Association (NBAA), International Aircraft Dealers Association (IADA) or the National Aircraft Finance Association (NAFA).
If you need additional help navigating the aircraft financing process, you can work with an aviation consultant or aircraft financing broker who will help you find the right lender and financing option for you. To attend to your needs.