Three Things You Need to Know About the Aircraft Loan Market Today
The aircraft financing market has been pretty fluid for the past few years, but overall it is strengthening in support of aircraft buyers. In this light, we have prepared a short overview on the aircraft financing market to help answer your questions regarding an upcoming purchase or refinance decision that you may need to make. Below are the
TOP 3 things you need to know about the aircraft financing market in 2013:
1. Bank Appetite is Growing
With the economy improving and many businesses continuing to rebound, lenders are no longer dealing with the default activity they had to regularly manage the last few years. Banks are now refocused on bringing in new business and growing loan portfolios. With this shift in focus we are seeing the most aggressive rates in years, faster turnaround times, and a much better attitude in the banking community toward lending money. This is a great environment for aircraft buyers – banks definitely want your business!
2. Aircraft Values Leveling Out
Another good indicator for our market is that aircraft values seem to be leveling off, no longer experiencing the free fall or large dips in values that we had experienced since the economic downturn in 2008. More and more, we are running into aircraft that are selling for more than book value (which usually trails the market by 3-6 months due to its reliance on historical data). If you are considering an aircraft purchase, we recommend a loan pre-approval to lock-in your financing and put you in the position to move quickly when you find your airplane.
3. Rates Starting to Rise
As the economy improves, rates will also rise. Similar to the real estate market, we’re seeing an increasing trend in longer term funds that underlie aircraft loans (see chart below). Underlying rates have been rising since early summer this year, and have stayed steadily higher over the last few months. However, if the overall trend continues, we believe we will see a gradual increase in rates over the next 2-3 years as projected. Rates are still low currently, but this is a good reason to lock in a long-term rate on your new aircraft purchase.
Chart: 5 year treasury rates over the past 5 years, demonstrating the recent increase in underlying rates.