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Airplane Loans

How is it that those with poor credit can relatively easily pick up a car loan for $30,000 payable over five or 10 years, but with even mediocre credit one cannot get a loan for an airplane for the same price?

From a logical perspective, this boggles the mind.

Aircraft, especially used, single-engine aircraft, are assets that doesn't depreciate nearly as quickly as a car. Compared to the accident rates among cars, airplanes are a far more sound investment. Insurance and ownership costs are comparable. The only major difference is the quantity. The number of cars requiring poor or mediocre credit loans is orders of magnitudes greater than that of aircraft. Regardless, there is an opportunity for some bankers to make money, but generally speaking, if you want an airplane loan, even for as little as $20,000 you need to have a credit score (FICO) greater than 720.

Also of note is the quantity of "skin in the game." Most car lots can provide financing with "0 down" where as many airplane loans require 20% to 50% equity before the bank will talk to you.

This is nothing new; these terms and conditions were in place before the terms "credit crunch" were on anyone's radar. And even now, the dichotomy still exists.