Finance: Buyer, be nimble

Buyers who finance may find themselves up against cash buyers. That’s why being nimble is so important: The buyer may have to make offers on multiple airplanes before getting into first position on a transaction.

If you intend to pay cash for an airplane and get it financed after the fact, make sure the transaction goes through proper escrow channels all the way to closing. Many buyers are aware that incomplete logs, damage history, or a title with a cloud over it are reasons for a finance company to nix the deal. However, uncertainty as to where (and to whom) the money from an aircraft sale went might also prevent a buyer from obtaining financing. Finance companies must vet not only the buyer, but also the seller to ascertain whether money from a cash deal is destined for a bad actor.

In past seller’s markets, AOPA Aviation Finance has seen frustrated clients want to offer a buyer well above asking price or settle for a lower quality airplane. But a tight market is a particularly important time to maintain objectivity. A buyer dead set on paying more than where an airplane “books out” with the pricing digest guides needs to be prepared to pay for a valuation to justify why the airplane is worth more, or shell out the difference between where it books and the asking price, in addition to the regular down payment.

Some clients reason that settling for a lesser-value aircraft at least gets them an airplane—for instance, pursuing a well-appointed TBM 700 because they lost out on one too many TBM 850s. However, supply will eventually “regress curve to the mean,” and when that happens, those aircraft with lesser demand will be first to see the drop in pricing. Depending on the anticipated length of ownership, this may not matter. An AOPA Aviation Finance expert can provide insight into the market and give additional data to determine if it’s worth taking that risk.

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