Aircraft Financing - Buying A Jet

If you are constantly on the move, whether for your own company, or a corporate environment, then you have probably already thought about the benefits of owning a private aircraft. While most people think that aircraft financing is something unatainable, the fact of the matter, is that more and more business people are finding themselves either financing an aircraft, or entering into a fractional jet ownership contract. Regardless of which method people use, travelling the world, while staying on track with your deadlines, has never been easier. Before you can finance an aircraft though, you are going to have to understand the types of aircraft financing, and loans that are available.

First, you are going to want to determine whether you want to purchase the aircraft in full, yourself, or if you are going to use a fractional ownership program, in which, you own the aircraft along with a few people. This saves incredibly on the costs for storage, staffing, fuel, and maintenance. The main differences between the two types of ownership, is that with fractional, you have to negotiate your schedule around other owners of the plane, whereas, with full private ownership, you have full access to your aircraft whenever you want it.

If you are choosing to enter into private, complete ownership, rather than fractional, you will want to find an aircraft finance company that is not only willing to work with you, but is also offering great rates on interest. Typical rates, in a down market, run around 5.8% to 6.0%, depending on the type of jet you are financing, and how much money is being put down on it. Commercial aircraft financing works the same way that a home loan, or auto loan do, except in much larger amounts. There are a few different types of loans that you can receive from most national aircraft finance companies.

The first type of rate, or loan, that you are going to find, is a fixed rate. While these loans are good for favorable markets, some people will have problems getting approved for them, simply because they are purchasing older aircraft. An aircraft finance company wants to know that the plane they are helping you purchase is going to be flying the skies for many years to come, and because the prices are so muh lower on used aircraft, many people automatically push for financing a used plane, over brand new.

Adjustable rate loans, on the other hand, are good when a jet owner is wanting to build up equity in their aircraft. The aircraft financing rates on these types of loans are adjusted every 3-5 years, and are best used, when owners are trying to refinance for a lower rate, in a down market. A lot of money can be saved by dropping the interest rate even a few points, and adjustable rate loans are the best method for achieving this.

What happens in this situation, is that the banks do not want to put themselves in the position of financing an aircraft that may have mechanical issues. Fixed rate loans are typically found from 15-20 years, and allowing for smaller companies to get into luxury business travel, without having to risk their entire operation.

Another type of loan, called index based loans, allow aircraft finance trust holders to pay off the balance, and build up their equity even further. Corporate jets are very expensive, and building up any extra momentum towards getting it paid off, goes extreme distances when the last few years of the loan rolls around, and you are ready to free up your companies liquid assets.