aircraft loans

  • Tracey Cheek posted an article
    Why Does An Aircraft Loan Take Longer Than A Car Loan? see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, explains the differences between aircraft loans and car loans.

    Most of us have gone through the car buying process and may think buying an aircraft would or should be similar. So, when it takes a day or two to approve a loan we may wonder why it's not as simple as a car loan. AOPA Aviation Finance President Adam Meredith explains the differences including differences in collateral and lifespan.

    Many of us have sat in car dealerships while the salesperson typed our facts and figures into a computer and within 10 to 20 minutes, there it is: We’re approved for a car loan. So why can’t a $45,000 airplane loan be that simple? Airplane loans take a day or two to approve, and sometimes longer depending on the financial complexity and number of borrowers.

    That’s because the underwriting process for an airplane loan is more like that for a house than it is for a car. With both a house and an airplane, lots of documentation needs to be collected and presented.  You need to supply photos, logbook entries, personal financial statements, tax returns, IDs, and more, and that’s in addition to signing a promissory note, security agreement, and other legal documents. However, one of the most time-consuming issues can be verifying a clean title to the airplane. 

    Consider that it would be rare to finance a 30-year-old car, but it’s an everyday occurrence to finance a 30-year-old airplane. Airplanes are designed and built to have a long life, so the average aircraft is far older than the average car. With that age, can come a very colorful history, which needs to be thoroughly examined. To make matters more complicated, it can sometimes take weeks to clear up issues arising from an improperly executed lien release. 

    On a positive note, because the registration process is centralized in Oklahoma City, Oklahoma, where all U.S. aircraft are registered, there’s only one place to check. Further, now that the FAA is willing to accept electronically executed documents, the process is going to become easier. Many banks and other lending institutions are slower in accepting electronic signatures, but that will change and speed up the process further. There is some hope here!

    Probably the biggest reason the process of obtaining an aircraft loan is slower than that for a car is aircraft lenders are not collateral lenders; they are cash flow and collateral lenders. Most automotive lenders can rely heavily (predominantly) on the collateral of the car because they can have greater confidence in the resale value in the event they must repossess the asset. When comparing to forecasting the resale value of an aircraft, this is much more challenging. Items like the condition or total number of hours on the engine can significantly impact value. If a lender gets back that Cirrus SR22 and the engine is run out, it’s going to easily cost up to $40,000 to overhaul it on a 10-year-old airplane that’s almost 20 percent of the aircraft value. Needless to say, forecasting the resale value of cars is a far easier task than forecasting the resale value of aircraft. 

    This article was originally published by AOPA Aviation Finance Company on May 3, 2019.

  • Tracey Cheek posted an article
    AMSTAT releases latest Business Aircraft Resale Market Update Report showing slightly slower
    Busine
    see more

    AMSTAT releases latest Business Aircraft Resale Market Update Report showing slightly slower Business Jet resale transaction activity so far in 2016.


    Tinton Falls, NJ – October 24, 2016: According to AMSTAT, the first three quarters of 2016 saw a slightly
    lower percentage of the Business Jets and about the same percentage of Business Turbo‐Props turning
    over as resale transactions versus the same period in 2015.

    In the first three quarters of 2016, 7.1% of the global Business Jet fleet turned over. This percentage
    was down versus 7.4% in the same period in 2015. By comparison, 5.8% of the Business Turbo‐Prop
    fleet turned over versus 5.7% for the same period in 2015.

    Resale Retail Transaction activity year to date was up for Heavy Jets with 5.9% of the fleet turning over
    in the first 3 quarters of the year, compared to 5.5% for the same period in 2015. In contrast,
    transaction activity for the Medium Jets resulted in 7.1% of the fleet turning over versus 8.2% for the
    same period in 2015. For Light Jets and Turbo‐Props, Resale Retail Transaction activity was largely flat
    for the first 3 quarters of the year compared to the same three quarter period in 2015 (7.8% versus 7.9%
    and 5.8% versus 5.7% respectively).

    The report also shows that business aircraft inventory levels continue to climb but with some evidence
    of a recent plateauing in certain market segments. 10.8% of the Heavy Jet fleet is now for sale. This
    percentage is up from 10.4% at the start of 2016. Over the last 24 months more of this inventory has
    come from Newer Heavy Jets, with 10% of that fleet for sale today versus 8% in 2015. Today 11.6% of
    the Medium Jets fleet is available for sale versus 11.2% at the start of the year. As with Heavy Jets, it is
    the Newer Medium Jet models that are seeing their inventory increase the most. The Light Jet inventory
    is currently 11.8% of the active fleet. This up since the start of the year but flat compared to the same
    time last year. 8.5% of the Turbo‐Prop fleet is for sale, up since the start of 2016 but down from 8.7% a
    year ago.

    Average Asking Price trends have been a mixed bag so far in 2016. The Average Asking Price for a Heavy
    Jets is $13.9M down 6.6% year over year. The increase in Heavy Jet Resale Retail Transactions so far in
    2016 has not been enough to raise Average Asking Prices. The Average Asking Price for a Medium Jet is
    $3.4M, down 7.8% from a year ago which is consistent with falling Resale Retail Transaction activity and
    increasing inventory in this market segment. The Average Asking Price for Light Jets is $1.7M up 6.7%
    versus a year ago and $1.4M for Turbo‐Props up 5.5% versus a year ago. These are curious trends given
    that transaction activity and inventory levels are essentially flat in these markets.

    For a full copy of the report go to: http://www.amstatcorp.com/docs/APR‐MUR‐1024‐2016.pdf


    About AMSTAT, Inc.
    AMSTAT is the leading provider of market research information and services to the corporate aviation industry. Founded in 1982, and based in Tinton Falls, NJ, AMSTAT introduced the concept of providing researched information to corporate aviation professionals.

    AMSTAT’s mission is to provide timely, accurate, and objective market information to its customers. AMSTAT products and services provide aviation market and statistical information that generates revenue and delivers competitive advantage to brokers/dealers, finance companies, fractional providers, and suppliers of aircraft parts and services.

    Information:
    AMSTAT, Inc.
    Andrew Young
    New Jersey: (732) 530-6400 x147 / andrew@amstatcorp.com / www.amstatcorp.com