Purchasing an aircraft is a significant investment, and most buyers require financing to facilitate the transaction. Understanding the available financing options, loan structures, and qualification requirements is essential for making an informed decision. This guide explores the most common aircraft financing methods, their pros and cons, and key considerations for buyers.
1. Traditional Aircraft Loans
How It Works
- A lender provides funds to purchase the aircraft, and the buyer repays the loan with interest over a set term (typically 5–20 years).
- The aircraft serves as collateral, and lenders may require a down payment (10–30%).
Pros:
✔ Competitive interest rates (often lower than leasing)
✔ Ownership from day one
✔ Potential tax benefits (interest may be deductible for business use)
Cons:
✖ Requires strong credit (minimum FICO 700+)
✖ Longer approval process than leasing
Best For:
- Buyers with strong credit who want full ownership
- Businesses using the aircraft for revenue-generating operations
2. Aircraft Leasing (Operating Lease vs. Finance Lease)
A. Operating Lease
- Short- to medium-term (1–5 years)
- Lower monthly payments than a loan
- Lessee returns the aircraft at the end of the term
B. Finance Lease (Capital Lease)
- Long-term lease (5+ years) with a purchase option at the end
- Treated as ownership for accounting/tax purposes
Pros:
✔ Lower upfront costs than buying
✔ Flexibility to upgrade aircraft later
✔ Off-balance-sheet treatment (for operating leases)
Cons:
✖ No equity buildup (unless a finance lease)
✖ Restrictions on modifications/usage
Best For:
- Corporations needing fleet flexibility
- Buyers who prefer lower initial commitments
3. Fractional Ownership & Jet Cards
A. Fractional Ownership
- Buyer purchases a share (e.g., 1/8 or 1/16) of an aircraft
- Includes management, maintenance, and crew services
B. Jet Cards
- Prepaid flight hours on a specific aircraft type
Pros:
✔ Lower cost than full ownership
✔ No management hassles
Cons:
✖ Limited availability during peak times
✖ Less control over aircraft usage
Best For:
- Frequent flyers who don’t need a dedicated aircraft
- Businesses with variable travel needs
4. Alternative Financing Options
A. Secured Lines of Credit
- Uses other assets (real estate, investments) as collateral
- Faster approval than traditional aircraft loans
B. Manufacturer Financing
- Promotional rates from OEMs (e.g., Textron, Bombardier)
- Often includes favorable terms for new aircraft
C. International Financing (for cross-border buyers)
- Structured through offshore lenders (Isle of Man, Cayman Islands)
- May offer tax advantages
5. Key Considerations When Financing an Aircraft
A. Credit & Down Payment Requirements
- Minimum credit score: 700+ (higher for better rates)
- Down payment: 10–30% (varies by lender)
B. Loan Terms & Interest Rates
- Term: 5–20 years (longer terms = lower payments but more interest)
- Interest rates: 4–9% (depends on credit, aircraft type, and market conditions)
C. Tax Implications
- Depreciation: Accelerated write-offs available (e.g., Bonus Depreciation in the U.S.)
- VAT/GST: Varies by country (some exemptions for business use)
D. Insurance & Maintenance Reserves
- Lenders often require hull & liability insurance
- Some loans include escrow for maintenance costs
6. Case Study: Choosing the Right Option
A tech startup needed a midsize jet for executive travel but lacked capital. They opted for a finance lease with a purchase option, allowing them to conserve cash while securing the aircraft for long-term use.
Conclusion
Aircraft financing is not one-size-fits-all—buyers must evaluate their financial situation, usage needs, and long-term goals. Whether through traditional loans, leasing, or fractional ownership, the right financing solution can make aircraft ownership more accessible.
Next Steps:
✔ Get pre-approved to strengthen negotiating power
✔ Consult an aviation finance specialist for tax optimization