Aircraft Finance Market Forecast: Purchase Now or Face Consequences Later
As we enter the year 2025, the landscape of the aircraft finance market is continuously shifting, offering a mix of opportunities and challenges for both buyers and lenders. Borrowing costs are on the decline in various sectors of the U.S. economy, leading to increased demand across the board for assets like homes, cars, and aircraft. This trend of reduced borrowing costs means that banks are now actively competing for borrowers’ business, resulting in a favorable scenario for those looking to purchase aircraft.
One notable trend emerging in the current market is within the owner-flown segment, which includes high-end pistons and turboprops. Despite the ongoing recovery in corporate travel and a growing desire for operational flexibility, demand for private aircraft remains strong. However, this sector is not without its complexities. The high-end piston and turboprop market, popular among owner-pilots, is experiencing dynamic shifts driven by a combination of experienced pilots seeking upgrades and new entrants into aircraft ownership. Many first-time buyers, who entered the market post-pandemic, are now considering newer models to address significant maintenance needs associated with older aircraft.
The availability of newer aircraft remains limited, with prices on the rise and financing conditions being impacted as a result. Furthermore, the potential restoration of the 100 percent bonus depreciation under President Donald Trump’s administration could further drive demand, potentially leading to heightened competition among buyers. Therefore, making swift decisions and being prepared to secure favorable financing arrangements has become crucial to avoid missing out on advantageous deals when demand peaks.
Interest rates for owners of piston-powered aircraft, turboprops, and jets currently stand at around the high 6 percent range, which is notably lower than the previous year by approximately 115 basis points. These competitive rates can vary based on factors like the borrower’s credit profile, aircraft age, and intended use, whether for personal enjoyment or business operations. The broader context of falling costs of capital is influencing the drop in interest rates for aviation lending, making it a compelling time for potential buyers to explore financing options within the aircraft market.
Loan-to-value (LTV) ratios have remained stable at 85 percent for personal/business use and 80 percent for commercial use, allowing buyers significant leverage opportunities. Term lengths ranging from 15-20 years provide flexibility for buyers to align their loans with financial goals and operational needs based on aircraft age and usage. However, flight school use aircraft are subject to rate increases above standard rates and increased down payment requirements due to higher wear and tear associated with these aircraft.
For those considering an aircraft purchase, utilizing resources like FLYING Finance’s aircraft loan calculator can assist in estimating monthly payments based on various factors like purchase price, down payment, interest rate, and loan term. Looking ahead into 2025, factors such as geopolitical situations, sustainability initiatives in the aviation industry, supply chain challenges, and regulatory changes may influence the aircraft finance market. Staying informed and engaging with knowledgeable aviation finance professionals will be essential for buyers to secure favorable financing conditions amidst the evolving market landscape.
