Owning an aircraft isn’t just about getting a loan and taking off—it’s about planning for the big picture. From financing to day-to-day expenses, pilots stepping into ownership quickly learn that the money side of things can be just as complex as the flying. Having a plan that considers all ownership costs makes all the difference in keeping your flying experiences enjoyable, your finances stable, and your aircraft’s value strong.
The Ongoing Costs of Ownership
Buying the plane is only the start. What sets smooth ownership apart is being ready for both the predictable, fixed-cost bills and the variable ones.
Fixed Costs (the steady stuff):
- Hangar or tie-down fees: Protecting your plane comes with a price, and it varies a lot depending on where you’re based.
- Insurance: Premiums depend on your pilot credentials and experience, your plane, and how you use it. Pleasure and business use policies are different from commercial use (charter, leaseback etc.) policies. It’s essential to have the correct coverage for your mission. You should also have both liability and hull coverage. Lenders will have specific requirements for insurance coverage so that their loan amount is covered if the aircraft is damaged beyond repair.
- Annual inspections: Required by law and essential for safety. Sometimes even more frequent checks are needed.
Variable Costs (what changes every flight):
- Fuel: Your hourly burn rate plus ever-changing fuel prices makes this a moving target.
- Maintenance and repairs: Beyond scheduled work, there will be surprises. Planning ahead for avionics updates and unexpected fixes helps avoid nasty financial shocks.
- Landing and navigation fees: Certain airports and international destinations charge fees that add up quickly if you fly a lot.
Financing: Loans and Leasing
When it comes to financing, you’ve got options. Banks and specialty aviation finance companies all offer different structures. The right choice depends on your budget and long-term plans.
- Loan terms: Shorter loan terms and amortizations mean higher payments but less interest over time. Longer terms are easier monthly but cost more over the life of the loan.
- Interest rates: Rates vary according to the aircraft you are financing, your mission for the aircraft, and your financial profile. Working with a reputable aircraft financing broker will help you find the best rates and terms for your specific scenario.
- Down payments: Bigger down payments save money in the long run, but you’ll need to weigh that against other investments you might want to make.
Leasing can also be a smart move, but lease terms/amortizations are generally no longer than 5-7 years long, so monthly outlay will be higher than it would for a term loan. Not all leases lead to ownership.
- Operating leases: These are basically contracts to “rent” the aircraft for a fixed monthly cost. These eliminate the need for the standard 15% – 20% down payment that term loans involve. The lessor retains ownership, so you don’t gain equity or get depreciation benefits.
- Finance leases: These usually offer 100% financing. Payments will be higher than they are with a term loan (a 5-year term with no longer amortization is standard), but there is often a purchase option at the end of the lease term. Lease payments are 100% deductible as a business expense.
Protecting Value Over Time
Aircraft often lose value like any big piece of equipment, but you can slow depreciation and even boost resale appeal if you follow some guidelines:
- Keep meticulous maintenance logs. Buyers pay extra for transparency.
- Stay current with avionics upgrades and safety upgrades, such as Airworthiness Directives.
- Watch the market so you know the best times to sell or trade.
Taxes and Ownership Structures
Taxes can make or break your ownership strategy. Smart planning upfront can save a lot later.
- Depreciation: Depending on how you use the plane, you may be able to write off 100% of it through bonus depreciation. These deductions are for business owners only. It is a good idea to consult with an aviation tax strategist to understand whether this strategy can work for you, and to ensure you structure things correctly.
- Sales and use tax: Where you close your aircraft purchase, and where you base the aircraft matters—laws vary widely.
- Entity ownership: Some owners hold the aircraft through an LLC or trust for liability protection, privacy, or to make shared ownership easier.
Preparing for the Unexpected
Even the best plans need a backup. Smart owners look ahead to things that could shake up their budget:
- Regulatory changes: From emissions rules to avionics mandates, compliance can mean new expenses.
- Unexpected repairs: it’s smart to keep a reserve fund for needed aircraft repairs.
- Exit strategies: Know when it makes sense to sell, trade, upgrade, or downsize. Having clear criteria avoids rushed decisions later.
Frequently Asked Questions
What makes aircraft loans different from other loans?
They’re more specialized. Lenders look closely at the plane’s age, type, and condition in addition to your financials. They also consider the mission of the aircraft.
Should I lease or finance?
Leasing offers 100% financing, but term loans work better if you want long-term ownership and value retention.
When’s the best time to buy?
It depends on market trends, inventory, and interest rates, as well as your tax situation. A good advisor can help you spot favorable windows.
What costs should I expect besides the costs of the loan?
Insurance, hangar fees, inspections, fuel, maintenance, landing/navigation fees, and technical upgrades all come into play.
For more information or to get a soft quote for financing, reach out to The Aircraft Lenders: info@theaircraftlenders.com or 862-277-5277.
