Aircraft Financing Advise

[mcurcio1989]

I'd like to take advantage of my plans to purchase an aircraft to build credit and hopefully help me in the next couple years when I seek to purchase real estate. I'm a 24 year old gainfully employed engineer with about 70k in liquid assets (in the form of toys) but I have never had an opportunity to take out a loan (always use cash and usually craigslist) . So rather than purchase this with cash I'd like to keep mine free for other investments that have returns and use this as an opportunity to build some credit history. The good- my credit score is good (740) , I have 7k of available credit, no debt, stable income; the bad is that I only have about 8 months of history on the credit cards (always pay on time and keep usage under 30%), and no other loan history. I'm only talking about a 25-30k aircraft and I can bring whatever down payment they need. This is really the last piece of the puzzle for me in this endeavor and I would like to get it squared away.


- I'd like some advice on financiers to get in touch with. I have the list from http://www.aeroprice.com/buyers/aircraftloans.htm but it is quite long so if anyone has recommendations on who I should start with that would be great. Otherwise, I'll just start dialing from the beginning.

- I'll figure this out once I start calling but can a financier give me a feel for what I am looking at without actually applying for a loan (not really pre approval because that would still require a hard inquiry I believe)? I do not want to negatively affect my credit score by making a bunch of inquiries but I also don't want to wait 3-4 months when I am ready to purchase and find out that I'm not going to be able to secure financing at a reasonable rate. I also imagine that the more lines I throw out the better rate I'll get but agian, don't want to do that at the cost of damaging my score.

- I'd like to be able to pay the loan of early (6 months - year) to minimize the amount of interest I pay. If anyone is familiar with any of the financiers on this list and their models, will that be an option or am I just going to take the hit on interest? If there are financiers that allow this please advise. Thanks

[3Dreaming]

I would start by talking to the people you are buying from and see if thay have some one they deal with who knows the airplane. Also If they know you at your local banking institution I would talk to them too.

[mcurcio1989]

I'm buying used from the manufacturer. I asked if he could recommend me some and I didn't get a response. He's been very helpful in everything else so I'm not sure why that is the case other than if he just doesn't really have any to recommend. I don't really have any good connections with my local banking institutions. I'll probably give them a try but I cannot imagine they'll be of any use.

[MrMorden]

What type of airplane are you looking to purchase? I know that it is VERY difficult to finance an experimental, most finance companies will not touch them. If you are looking at a certified or SLSA airplane then there should be many options. Most banks don't really understand aircraft financing, and treat it like a car loan, which could work for you if you want to handle it like that.

I have used US Aviation Finance: http://www.usaircraftfinance.com/ and had a great experience with them. They are pretty easy to deal with, finance certified and SLSA aircraft with up to 20 year terms, and have no prepayment penalty for paying it off quicker as long as you keep the loan open at least one year. They give you a checklist of everything you need to do or document in order to close the loan, which makes it easy to know what you need to do.

[dstclair]

http://www.usaircraftfinance.com/. $25K minimum.

[mcurcio1989]

It is an Aventura II made by Aero Adventure and it is an E-LSA - ut oh. I sort of got the impression that it's experimental kits that are tough to finance but as used it isn't as big of a deal. I am fine treating it as an auto loan (I think). Maybe I need to push the factory salesman a little more because he stated very clearly that there are companies that will finance their aircraft used.

[mcurcio1989]

I just talked to Rick at NAFCO and they will be able to finance the aircraft for a 10 year loan but it sounds like my lack of credit history will be more of an issue than anything.

[MovingOn]

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[drseti]

"Toys" don't count as liquid assets.

In 3 1/2 decades of owning various aircraft, I can tell you that airplanes are never assets of any type. They are, strictly speaking, always liabilities.

[mcurcio1989]

^ All jokes aside, I certainly don't look at an aircraft as an assets either. By the time you pay for maintenance, upkeep, storage, insurance, etc. (at least in my case) your basically spending the cost of the plane every 10 years. Although I would think they would be an asset in some sense if your an instructor.

I guess my terminology was incorrect but I was saying toy's in the sense of a car, rv, motorcycle, etc. with negligible upkeep cost and the value being a fast sale. Notice I didn't include boats either we all know those are liabilities to!

[MovingOn]

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[FastEddieB]

Do you own your home and have enough equity in it to cover the purchase?

When I financed my Cirrus, it was the cheapest way to go for me, and no strings about what the money is bring used for.

Of course, if you default you can lose your home, but that does not seem to be an issue in your case.

[mcurcio1989]

I don't own a home which is kind of the whole point in financing this. I'd like to take this opportunity to build some credit history so it won't be a pain to get a home loan at a reasonable rate.

At this point in my life I'm not sure where I'd like to end up geographically and my rent (including utilities) is $200 a month so owning a home just makes no sense.

[designrs]

I just went through Hell trying to finance a LSA... I have a looooooong history of * perfect * credit on everything including, homes, equity loans, many high-end cars, and a $200k+ motorhome. The banks want TAX RETURN BOTTOM LINE. As a small business owner my bottom line on my tax returns can be positive or negative depending on deductions, depreciation, various business operations, etc. (as is the case with many businesses).

The banks ignored my perfect credit history, cash on hand, bank deposit history, and the fact that I reliably pay for everything.

I then went to AOPA finance which is supposed to "package" and "match" the borrower to their most appropriate partner bank. That bank was Pilot Bank. Their evaluation of my application was in my opinion very insulting. Commercial banks were somewhat more accomidating and I EXPECTED BETTER FROM AOPA FINANCE!

Tough finance market for planes out there.
Seems like it's all "cash & carry".
Good luck!

[mcurcio1989]

^Do you mind me asking how much the value of the loan you were trying to get is.

In my case the aircraft only cost 25k and they said I would put 15% down so say I put 20% down there out of pocket is only 20k. Given my salary, debt to credit ratio, the fact that I have more than that in the bank, and other assets I have absolutely no idea why they would think twice but I know it will be a pain. I may end up having to just pay cash but I'd really like to make this work.

I understand that your case is still probably proportionally less riskier but still were talking about 20k whats the big deal. Also did you try NAFCO? they made it seem like it would be pretty simple just my lack of credit history is a concern