As we settle into 2025, the aircraft finance market continues to evolve, presenting both opportunities and challenges for buyers and lenders alike. Costs to borrow are dropping across asset classes in the U.S. economy, stimulating demand for everything from homes to cars and aircraft.
The bottom line is that banks are competing more aggressively for borrowers’ business, which is great for aircraft buyers. This month, we’re seeing some interesting trends emerge, particularly in the owner-flown segment encompassing high-end pistons and turboprops.
The demand for private aircraft remains robust, driven by a combination of factors, including the ongoing recovery in corporate travel and a desire for greater operational flexibility. However, the market is not without its complexities. Let’s dive into the current landscape and what it means for potential aircraft buyers.
Market Dynamics in Owner-Flown Segment
The high-end piston and turboprop market, popular among owner-pilots, is experiencing particularly interesting dynamics. Demand remains strong, driven by both experienced pilots looking to upgrade and newcomers entering the world of aircraft ownership. This segment has seen a notable influx of first-time buyers who, having entered the market in the immediate post-pandemic period, are now looking to upgrade or replace their initial purchases.
As some first-time buyers opted for older models due to their lower initial costs, they now face significant maintenance needs. This has prompted them to consider newer models, impacting both new and pre-owned aircraft sales across the market.
The availability of newer aircraft remains constrained, a trend anticipated to persist throughout 2025. This scarcity is driving prices upward and impacting financing conditions. Moreover, President Donald Trump’s administration has hinted at restoring the 100 percent bonus depreciation, which could further stimulate demand. Buyers targeting these sought-after models may face heightened competition, necessitating swift decision making and thorough readiness to secure advantageous financing arrangements. Waiting could cost you thousands when demand hits its peak.
Interest Rates and Terms
For those considering financing options in the aircraft market, interest rates for owners of piston-powered aircraft, turboprops, and jets are currently in the high 6 percent range. This is a lower rate than last year by about 115 basis points, making it a compelling time for potential buyers. These competitive rates can vary based on factors such as the borrower’s credit profile, the aircraft’s age, and its intended use—be it for personal enjoyment or business operations.
Interest rates for aviation lending have dropped in a broader context of falling costs of capital across the economy.
First, 10-Year U.S. Treasury yields have fallen 55 basis points this year, reducing the cost for the federal government to issue debt. Average 30 year fixed-rate mortgages are at 6.67 percent, according to the St. Louis Fed, down from their peak at 7.76 percent in November 2023. Finance rates on new auto loans also peaked late last year, and are down to 7.8 percent on 60-month loans, as of November. We expect falling interest rates to stimulate capital investment and industrial production, particularly in the construction and automotive industries, but also in general aviation.
Returning to aircraft, the average loan-to-value (LTV) ratio is holding steady at 85 percent for personal/business use and 80 percent for commercial use (charter, leasebacks, etc.), providing buyers with substantial leverage opportunities. Terms are ranging from 15-20 years, with the specific duration often contingent on the aircraft’s age and how it will be utilized. This flexibility allows buyers to structure their loans in a way that best aligns with financial goals and operational needs.
However, it’s important to highlight that flight school use aircraft are seeing rate increases of 1 percent to 2 percent above the standard rates, coupled with increased down payment requirements. This reflects the higher wear and tear these aircraft typically endure and the associated risk from a lender’s perspective.
Financing Tools and Resources
For those considering an aircraft purchase, understanding the potential costs and structuring of a loan is crucial.
FLYING Finance offers a useful aircraft loan calculator that can help prospective buyers estimate their monthly payments based on the purchase price, down payment, interest rate, and loan term. This tool can be invaluable in the early stages of planning, allowing buyers to explore different scenarios and understand how various factors impact their financing options.
Looking Ahead
As we progress through 2025, several factors are worth monitoring for their potential impact on the aircraft finance market. The ongoing geopolitical situations in Europe and the Middle East continue to create uncertainty in global markets, which could influence interest rates and economic conditions more broadly.
Additionally, the aviation industry’s push toward sustainability is gaining momentum. This could lead to increased demand for more fuel-efficient aircraft models and potentially influence financing terms for older, less-efficient aircraft.
The supply chain challenges that have plagued the industry in recent years are showing signs of improvement, but their effects are still being felt. As new aircraft production ramps up and delivery times potentially shorten, this could impact the dynamics between the new and pre-owned aircraft markets.
Lastly, regulatory changes, particularly those related to emissions standards or tax policies, could significantly influence the market. Buyers and lenders alike should stay informed about any potential shifts in these areas.
March presents distinct opportunities within the aircraft finance market, albeit ones that demand strategic maneuvering. For prospective buyers—particularly those eyeing high-end pistons and turboprops—comprehensive research, diligent financial planning, and collaboration with knowledgeable aviation finance professionals will be crucial in securing an aircraft under favorable conditions.
As always, the team at FLYING Finance is prepared to guide buyers through their options, helping them discover the financing solution best suited to their needs.