Aircraft finance is a little understood corner of finance. Buying aeroplanes are a major investment, almost tantamount to buying a house that flies. (In some cases, buying an aircraft is even more expensive than a house!) With this in mind, what option is out there for financing an aircraft or helicopter? If you already own an aeroplane, can you finance engine rebuilds or conversions? This blog post aims to answer all your questions about finding the right aircraft loan.
No loan – pay in cash
We can dream, can’t we? If you have the money, you can pay in cash. But for many of us, whether we’re private buyers or commercial businesses must take out a loan product of some description.
Bank loans or home equity loans
If you’re a private buyer, you may hold your cap out to your bank for a personal loan. Personal loans for very light or small aircraft such as single or twin piston-engine planes are available out there with banks that deal in aviation finance. However, you’re stuck with whatever the bank has on offer, and this may not be favourable as other options. Another popular option is financing through home equity loans. Of course, you will need a mortgage and significant equity to make this happen.
Private aircraft loans
Private buyers can always turn to aviation specialist lenders for a loan. Individual lenders have different deals and packages available. It’s usually best to find a aviation broker that has ties to many lenders and banks so you can get an even better deal. Brokers do the hard work in finding a loan for you.
Commercial hire purchase
Commercial hire purchase is a type of loan product for businesses. The financier or bank owns the plane until you pay off the loan and ownership passes to the buyer. Businesses take out hire purchases primarily to keep their cash flowing. One can hire purchase a plane, helicopter or engine rebuild for 100% of the purchase price – even exceeding that amount so you can pay off extras such as insurance incrementally as well. Companies may claim GST paid on the aircraft, claim depreciation and interest payments on their BAS.
Chattel mortgages are similar to hire purchases except a ownership passes to the buyer upon settlement and a mortgage is placed on the aircraft (the “chattel.”) Much like a hire purchase, you can apply for 100% finance, finance extras, claim GST and depreciation and/or interest. You can also tailor a chattel mortgage aviation loan with extended or shortened loan terms, balloon payments (residual value payments) and other modifications otherwise unavailable in private aircraft loans.