How to get a helicopter loan
Before you buy a helicopter
- Decide whether a helicopter or airplane is the most sensible. Helicopters are designed to handle shorter trips for smaller groups.
- Think about a lease option rather than a purchase. A lease may save you money through income-tax deductions or sales-tax exemptions.
- Analyze the upfront costs, as some lenders will require a minimum loan amount, as well as how quickly the helicopter is expected to depreciate.
If you have the financial means to purchase or lease a helicopter, it could be a time-saving investment that’s worth considering as an alternative to driving or public transportation.
Whether you’re considering an aircraft for business or pleasure, the questions you need to ask yourself — as well as dealers and lenders — are similar.
Helicopter or airplane?
One of the most fundamental questions you can ask yourself before shopping around is deciding whether an airplane or a helicopter makes the most sense. Helicopters are generally well suited to handle short trips for small parties. If you need space for six or fewer passengers, and your destinations are less than a couple of hours away, a helicopter is likely a smarter investment than a plane. A typical midrange-model helicopter can take you up to 350 miles before you’ll need to refuel.
Choosing a pilot is another consideration. Will you be the pilot or passenger? You’ll either have to invest time and money in helicopter training or hire a pilot. And, generally speaking, the larger the helicopter, the more expertise a pilot needs, so know your limitations when it comes to operating the craft.
When it comes to the actual loan-financing piece, airplanes and helicopters are relatively similar, although you should ask dealers or brokers to spell out the exact purchase prices, and you should ask lenders to provide precise down payment and interest rates.
Some helicopters have seen their prices soar in recent years, with some of the most popular models going for $250,000 to $500,000. Lenders may restrict borrowers from buying aircraft that is more than 15 to 20 years old. Terms between five and 10 years with interest rates of about 6 percent are common for all types of aircraft. Specialty lenders may be the best way to finance a helicopter, since traditional banks often require a down payment of 20 to 30 percent.
Lease or purchase?
Once you’ve decided that a helicopter is your best option, you’ll still want to choose the way you invest. Is it better to buy or lease? Think of a helicopter lease like you would a timeshare on a vacation property. The lease covers the costs of a pilot, fuel, insurance and landing fees.
An important distinction between leasing and buying has to do with tax credits. When you sell your helicopter, it can create a tax burden if you’ve been using depreciation recapture — essentially, spreading the costs of the asset over a long-term period. Leasing, however, means you can reclaim the full value of any business-related deductions, and you won’t have any issues regarding income since you don’t own the helicopter. Be sure to talk to your tax advisor before you make these decisions.
The amount of sales tax you’ll pay for a lease agreement is also much less than a purchase agreement on the same product. Some states do not require any taxes for lease payments.
Is it affordable?
Helicopters typically hold their value better than cars, although supply and demand can greatly impact pricing. According to digital business-news company Quartz, helicopters may be more affordable in general, as some models cost between 10 percent and 50 percent less in 2016 than they did in 2014. However, it’s important to consider extraneous costs such as a pilot, hangar storage and landing pads. Helicopters can’t land just anywhere, so you’ll need access to a landing pad within a reasonable distance of your most common destinations.
Formulate a budget before shopping. A used model may cost half as much as something brand new. Maintenance and insurance costs, as well as depreciation, are important factors in your purchase and finance decisions. If the model in question will decrease in value by 5 percent to 10 percent annually, it may not be worth the investment. Study different designs to see what fits your needs. You may want a separate cabin from the cockpit, allowing for privacy, but you’ll pay for the privilege.
Lenders may require a minimum loan amount of $25,000 to $100,000, so that could impact how much you’ll actually want or need to finance. They may require a strong financial profile, such as a credit score of 700 or higher or a debt-to-income ratio of 36 percent or lower. If you’re purchasing a helicopter for your business, the lender may require a debt-service coverage ratio of 1.25 or higher. Finally, they may require insurance for the full value of the aircraft. You may consider additional insurance that will cover the full replacement costs based on any equity you build.