VREF Episode 66 Examines Aircraft Financing Records, Rate Costs and Lender Age Limits
Why It MattersHigher borrowing costs and appraisal-gap rules shift more of the purchase price onto buyers' cash, tightening financing for older business jets and favouring well-capitalised borrowers.
Episode 66 of VREF Aircraft Values & Appraisals' "The Truth About the Aviation Market," titled "The Price of Money," examines hundreds of aircraft financing records. It covers interest rates, lending standards, bank behavior, dealer inventory financing, aircraft lease obligations and financial pressures in the market. In the records examined, G450s, Challenger 300s and a Falcon 900 were acquired by parts businesses with secured financing from financial institutions, which raises the question of where lenders believe recoverable value lies.
The episode states that on September 16 the Federal Reserve raised its target federal funds rate by 25 basis points to a range of 3.75%–4.00%, and on October 28 held rates steady, with two policymakers preferring another quarter-point increase. In late October 2026 the 10-year U.S. Treasury yield was about 5%, reaching 5.05% on October 28. The federal funds rate is not necessarily the rate that prices an aircraft loan: floating-rate loans may use benchmarks such as SOFR or Prime plus a spread, while fixed-rate financing commonly reflects Treasury yields or swap rates. In a hypothetical $10 million loan with a 20-year amortization, the monthly payment is about $71,643 at 6.0% and $80,559 at 7.5%, a difference of $8,916 per month, or roughly $535,000 over 60 months. The illustration assumes level payments with no fees or rate changes and compares only the first five years of cash payments.
On underwriting, strong borrowers buying financeable aircraft may obtain loan-to-value ratios of about 80%–85%, implying a 15%–20% equity contribution, while some older jets may call for a 30% down payment. In an appraisal-gap example, an $8 million agreed price with a lender-accepted value of $7 million and an 85% advance yields a maximum loan of $5,950,000, so the buyer needs $2,050,000 in cash, which is $850,000 more than the $1.2 million originally anticipated. A 20-year amortization does not mean a 20-year term, as the contractual term may be five or seven years.
Other topics listed for the episode include lender age limits on older jets, which lenders appear in aircraft lien records, the role of regional and community banks in new business-aircraft liens in the examined sample, four kinds of aircraft financing, aircraft finance brokers, dealer floor-plan costs, lease residual values, and differences between large-cabin jets and turboprops.
