aopa aircraft finance calculator

Aopa Aircraft Finance Calculator - At AOPA Aviation (AAF), "How many planes can I get?" We found the answer to this question. It is found in answering four other questions: How much money do you have for a deposit? How much can you pay per month? What is your ratio to income (DTI)? How do you view credit?

Before accepting a bank loan, the borrower must be comfortable knowing that in addition to the monthly loan payments, the historical operating expenses of the projected aircraft can be met. Thus, each aircraft lender will require two or more annual financial statements from the borrower. Reviewing these helps determine if the borrower's debt-to-income ratio is within acceptable limits. In general, the risk level is less than 40%.

Aopa Aircraft Finance Calculator

Banks then look at the DTI of the loan, as well as the expected operating costs for that aircraft, available costs, and historical technical data by make and model. They will differ in your ability to manage the estimated additional monthly loan service and expected operating expenses.

Buying Your First Aircraft

Contrary to popular belief, credit score reduction and loan amortization are not the main determinants of aircraft financing. The actual amount of the loan. In general, most aircraft loans have very good credit, so banks divide the loan repayment/amortization period into three distinct categories.

The first category includes loan amounts between $50,000,000 and $100,000. A loan can put 20% and see a loan amortization of 15 years. The second category starts at $100,000. Expect to put 15% down on the asking price and look for a 20-year loan amortization period. The third category starts at around $1 million where everything is negotiable.

In that area, the loan can be offered a payment of 15% and an amortization plan of 15 years. Or the bank can offer a 20% discount on a 20-year plan. At this level, banks often use a long rule that can also complicate things. The so-called thirty-year rule says that the age and depreciation of an aircraft should not exceed thirty years. For example, a ten-year-old King Air may qualify for 20 years of depreciation, while a 15-year-old King Air may be limited to 15 years (but don't expect 5 years of depreciation on a 25-year-old—it's an old airplane).

It is important to speak with professionals like AAF who have all the knowledge and deep experience with all aviation lenders. We can guide you with the rules which are not always hard and fast.

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For example, sometimes the right mix of financial press and turboprop can make a longer loan. Part of this is knowing that the bank's turboprop owner is setting aside reserves for a major engine overhaul. Part of this is that turboprop damping curves flatten out more quickly and hold up better over time. In contrast, banks tend to be more conservative in granting longer amortization schedules on older aircraft, sometimes even reducing the term to thirty years. The reason for the flight is that it is used faster than other planes. Older aircraft require more maintenance, which increases wear and tear.

The AAF can discuss some special options for strong borrowers. To do this, the lender can accept a lower initial payment of 10% (or even 0%) with a shorter amortization. Likewise, if a highly qualified applicant can put down 40%, they can get an interest-only loan, so there is no amortization and tax benefits are maximized.

One thing we always caution and recommend is that depreciation precedes depreciation. While there are certain terms that may seem beneficial, what we do not want for our members is to reach the end of the term and have to write a check. It's not good for the lender, it's not good for the market, and it's not good for the buyer because you had a bad idea when you bought the plane.

Great prices. Good words. Effective and efficient agents. Three reasons to return to AOPA Aviation when purchasing an aircraft. If you need a reliable funding source with people on your side, call 800.62.PLANE (800.627.5263) or click here to request a quote.

Preventing Takeoff Emergencies

Adam Meredith, President of AOPA Aviation, is an aviation professional with over 15 years of lending, small business management and customer service experience. Adam is a commercial pilot with multiple engine and instrument ratings. The Fed is working very hard to keep inflation under control, and we have raised interest rates significantly recently to try to slow down the economy. This is directly related to what it takes to get a loan. Airlines are less immune to what the Federal Reserve does than other industries.

From my point of view, I am frankly surprised that with all the actions that the Federal Reserve has taken, we can compare interest rates to what we have provided for the last 10 years. From this perspective, it is not all a terrible news.

They have had very soft interest rates for some time. As such, people expect this unusual period of low interest rates to become normal. In the long run, this is not normal. Historically speaking, current rates are now normal. We are approaching what the Federal Reserve calls the "long-run equilibrium rate." At some point, the economy will freeze. Maybe it takes years, not months.

At the same time, there are huge macro challenges for our industry. New aircraft production is less than 2% of the current fleet. The market loses about three times that number of aircraft in a given year through obsolescence, crashes or otherwise. The problem of limited supply is not new, in fact it predates the COVID pandemic, supply problems and the Great Labor Revolution. Cirrus and Tecnam have entered the market with considerable success (defined as the number of units produced) in the last 2 decades. As long as other new entrants can offer light aircraft at affordable prices, AOPA works actively to support them, and this supply/demand conflict will only continue.

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A combination of constant rate increases is strict adherence to any rate lock periods that banks may offer. While higher rates also benefit, the real problem is that the growing currency locks are not favorable to extend the interest rate locks and affect their main source of income, the net income.

In these economic climates, AOPA recommends that any rate you receive be considered the rate you will pay over the life of your loan. Refinancing is not possible in the short term when rates are likely to fall. If history is a guide, we are entering a normal phase of the economic cycle, and this phase can last 1-2 years rather than 3-6 months, which means a significant decrease could happen in 2-3 years.

Bottom Line: Prices are rising, which creates an urgency to do something. People may not be able to get the plane they want because they lose business for money buyers. The best thing you can do to protect your closing rate is to get financing and pre-approval, even on the destination plane, before applying for a loan. This means getting your financial and legal house in order to prepare all the documents. AOPA is here to guide you through the pre-flight process.

Good advice. Great prices. You can count on useful and efficient agents. Here are three good reasons to turn to AOPA when buying or refinancing an airplane. If you need a reliable funding source with people on your side, call 800.62.PLANE (800.627.5263) or click here to request a quote.

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Adam Meredith, President of AOPA Aviation, is an aviation professional with over 15 years of lending, small business management and customer service experience. Adam is a commercial pilot with multiple engine and instrument ratings.

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