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AirFleet Introduces New Financing Product for Aircraft Lending

Tuesday, December 08, 2009

In AirFleet Capital’s most recent e-newsletter, we announced our new 3 year adjustable interest program. In summary, this program is intended for customers who want a long amortization (and low monthly payment), want the best rate possible, and are likely to upgrade in some form in 3 years or less. There is risk with a variable interest rate due to the uncertainty of the rate in the future; however with our Adjustable Rate program the rate changes every three years, not three days.

This model could work for many interested in financing because the average customer upgrades or moves up in aircraft every three years, using the timing of this program to their advantage. If you think you will need to refinance to overhaul your engine in the next three years, this might be an excellent program as well.

This program is indexed to the Federal Home Loan Bank’s (FHLB) 3-year Classic Advance rate. Below are some of the highlights of the program.

3-Year Adjustable @ 5.50%

Loan Amount: $250,000 or more, to a ceiling of $4MM

Down Payment: 20% minimum

Amortization: 20 Years

Term: 20 Years

Interest Rate Term: Rate adjusts each 3 years of the 20-year term

Interest Rate Basis: 3-year FHLB + 3.50%

Interest Rate Floor: 5.50%

http://www.fhlbboston.com/includes/classic_pop.jsp – Scroll down to the 3 year rate to see what it is today and then add 3.50% to that figure, but again note that there is a “floor” of 5.50% on the financing product.

You will first notice that there is a floor of $250,000. It also has a slightly higher down payment requirement of 20% as compared to the standard 15%. This program is not designed for aircraft of lesser values.

The real substance here is the adjustable feature of the loan. Once every 3 years, the rate will adjust 3.50% over the 3 year FHLB rate on the third anniversary of your loan date. This repeats for the life of the loan. The 5.50% floor means that no matter what that FHLB rate is, the interest cannot go below 5.50%. As of last week when we priced the above rate, it was at the best rate possible.