Aircraft manufacturers and sellers of used aircraft note that it’s harder these days for business aircraft buyers to get financing, despite the fact that banks say they’re lending again.
Here’s what’s happening. According to aviation consultant Brian Foley, the loans are being evaluated differently now, and buyers must understand that.
Residual values on used jets have plummeted, so today’s loans are based more on a borrower’s balance sheet and less on the value of the aircraft. Most banks won’t finance jets more than 20 years old, Foley said. For some, 10 years is the cut-off point.
Banks are also requiring higher down payments. “Gone are the days when a buyer could borrow more than the aircraft’s price with no money down and invest the difference in improvements,” Foley said. Today’s buyer can expect to pay 10 to 15 percent down.
Because of the tighter lending situation, many sales of used aircraft have been cash ones, Foley said.
The new business jet market won’t really move again until the glut of quality used aircraft sells first, Foley notes.
“But with lending more restrictive now, the road to recovery feels like it’s paved with quicksand,” Foley said. Even so, there’s good financing available for buyers of used aircraft — but only to the best credit risks who are buying younger, used airplanes.