It can be exciting to invest in a light aircraft and this can be for light training, business use, personal pleasure etc. There is the financial aspect of this venture to be considered and in this article, we will explain some of the financing options available for you.
An outright cash purchase is the most straightforward way of buying a light aircraft.
The full amount will be paid upfront without having to maintain any financial obligations. You don’t need to make any interest payments but this option may not be possible for everyone as a light aircraft can be a substantial cost to pay. You can then look into other aircraft finance options. You can take an aircraft loan which is quite similar to financing a house or vehicle. There will be a financial institution that you will be borrowing money from and you will repay it over a certain period of time with interest. The loan terms can go from five years to twenty years depending on the creditworthiness of the borrower. Aircraft leasing is another option you can consider. There is a lot of flexibility with leasing and you will pay a lower initial cost compared to buying the aircraft outright.
In leasing,
There is a monthly fee you will need to pay in order to use the aircraft for a certain period. This can be from 1 to 5 years. Once the lease term ends, you can purchase the aircraft at a price that was predetermined. If you want to avoid long term commitments or if you are planning to upgrade to a different aircraft, leasing can be a good option to consider. Multiple individuals will be able to share the ownership of the aircraft when it comes to fractional ownership. The cost for the aircraft and the associated responsibilities will be shared between the individuals. A portion of the aircraft price will be paid by each owner and they will also contribute to ongoing expenses like insurance and maintenance. What they pay will be proportional to the ownership share. It is a good way to maintain occasional access to an aircraft without having to bear the full financial commitment that comes with ownership.
The seller can also offer financing options to buyers directly in some cases.
This will eliminate the need to deal with traditional lenders. The seller financing agreements tend to vary and there can be instalment or balloon payments involved. The arrangement will be negotiated between the seller and the buyer. This can be a convenient option but it is very important that you review the terms carefully so that you have a good idea of your obligations. There are government financing programmes as well where small businesses will be given assistance to acquire capital assets such as aircrafts. There are lower interest rates and longer periods for repayment available if you are a qualified applicant. It is a good idea to research the financing options made available by the government before you start looking for other financing methods.
