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Finance: One size doesn’t fit allFinance: One size doesn’t fit all

Why do I need to pay for an engine program?

I’m often asked by people seeking to purchase a light jet for the first time, When do I need to (or why do I have to) pay for an engine program? There are good arguments both for and against engine programs in general. However, frequently buyers do not want to pay the monthly expense of an engine program.

These buyers think: Why do I need to pay someone to manage a reserve account on my aircraft for when the airplane’s engine(s) need to be overhauled? There’s more benefit to an engine program than simply prepaying for maintenance. The main reason many lenders require certain aircraft to be on an engine program is that when most of a particular make and model’s fleet is on a program, an aircraft that isn’t would be highly undesirable if the lender had to repossess and then sell the airplane.

For example, most of the Cessna M2 fleet is enrolled in Tap Elite. As a result, if you look at the pricing digests (vRef or Aviation Bluebook) it is assumed that an M2 is on the program. If it isn’t, the value of the airplane is less by the cost to enroll the airplane in Tap Elite. A 2015 M2 with average times would have approximately 1,400 hours (or be at 28 percent of TBO). That could cost more than $300,000 (28 percent of the $520,000 overhaul cost for each engine) to enroll in Tap Elite. The last thing a lender is going to want to do after repossessing an aircraft is to have to spend another $300,000 to make the airplane marketable. Lenders will instead simply require borrowers to maintain program enrollment as a condition of the loan terms.

There are also good reasons why an engine program makes sense for owners. The actual cost and quality of the work is typically much higher when the work performed is done by the manufacturer, who will also stand behind its work. Loaner engines are typically available for program owners. Additionally, when it comes time to schedule the work to be done, frequently we see much quicker turnaround for aircraft on engine programs versus those that are not.

If you still don’t want to enroll, we understand. That’s why AOPA Aviation Finance partners with different lenders, because one size doesn’t fit all.

Email [email protected]

finance.aopa.org, 800-62-PLANE (75263)

Adam Meredith

Adam Meredith

President of AOPA Aviation Finance Company
Adam Meredith, President of AOPA Aviation Finance Company, is an aircraft finance professional with more than 15 years lending, small business management and customer service experience. Adam is a commercial pilot with multi-engine and instrument ratings.
Aero-Space Reports

Aero Space Reports

Sponsor of Aviation Finance
Aero-Space Reports, a third-generation family-owned business, has been a leader in the aviation title industry for more than 45 years. In that time, they’ve seen tens of thousands of aircraft purchases: They’re all too familiar with what can go wrong, and they know exactly what it takes for things to go right.