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What are my options for financing a plane that will need an EO almost immediately after purchase?

What are my options for financing a plane that will need an EO almost immediately after purchase?

NAFA member Adam Meredith, President of AOPA Aviation Finance Company, answers your aviation finance questions.

Question: I see on AOPA Finance that I can potentially finance an engine overhaul with sufficient equity in the plane. What are my options for financing a plane that will need an EO almost immediately after purchase? I am willing to put enough down on the note so that there is sufficient equity in the plane for an EO loan if I can roll that in. To be explicit, the plane is $37,500, and the EO estimate for that engine is $24,000. I am not sure what the equity requirement is, but let's say it is 40%. So, what I would hope is that I can get a loan  for $46,500 by putting down $15,000 on the plane, with the loan then completing the purchase price with $22,500, leaving $24K in the note for the EO. If the EO goes over that, I would just eat that cost myself.

Answer: Rolling an overhaul into a purchase is a fairly simple process. As part of our internal review and the lenders’ underwriting, two values for the aircraft will be determined. One as-is for the purchase and a second with a zero-time engine. Financing can be up to 85% of the final value with the overhaul included. In your example, assuming value is roughly equal to cost, financing would look like $31,875 towards the purchase (85% of $37,500) and $20,400 towards the engine for a total loan of $52,275. The initial $31,875 would be disbursed at the time of purchase with the remaining $20,400 disbursed once the engine has been installed and signed off by the A&P. We would be happy to discuss the details further if you would like. Just give us a call at 800.627.5263.

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This article was originally published by AOPA Aviation Finance Company on July 7, 2021.


 August 16, 2021