Aircraft Loan-to-Value Explained, With Examples
Aircraft loan-to-value (LTV) is the loan amount divided by the aircraft's value, and lenders use the lower of the purchase price or the appraised value. Published guidance puts typical LTV at about 70% to 85%, which means a down payment of roughly 15% to 30%. Asset-based low-LTV loans use more equity, often around 40% down, in exchange for lighter paperwork.
Key takeaways
- LTV is the loan amount divided by value, and the value is the lower of purchase price or appraisal.
- VREF describes typical aircraft LTV ranges of 70% to 85%, with older and large-cabin jets often tighter.
- AOPA Aviation Finance says traditional loans usually need 15% to 20% down, while low-LTV loans typically need about 40% down.
- A low appraisal does not change the price you agreed to; it shifts more of the purchase onto your cash.
- Because loans usually amortize while values move with the market, LTV changes over the life of the loan and can be tested again by covenants.
What is loan-to-value on an aircraft loan?
Loan-to-value (LTV) is the loan amount divided by the value of the aircraft, shown as a percentage. A $300,000 loan against a $400,000 aircraft is 75% LTV. The remaining 25% is your equity, which usually arrives as your down payment.
LTV matters because the aircraft is the lender's collateral. If a borrower stops paying, the lender expects to sell the aircraft and recover the balance. The lower the LTV, the more the aircraft can fall in value before the lender takes a loss. That is why LTV drives the down payment, the rate and sometimes the paperwork you are asked for. See the airplane financing guide for how the whole process fits together.
Is LTV based on the purchase price or the appraised value?
It is based on whichever is lower. AOPA Aviation Finance says the down payment is calculated on either the purchase price or the appraised book value, whichever is lower. VREF makes the same point from the appraiser's side: banks lend against appraised value, not an inflated purchase price.
This has a practical consequence. If you agree to pay $400,000 and the appraisal comes back at $370,000, the lender measures its percentage against $370,000. You still owe the seller $400,000, so the gap comes out of your pocket. Read what an aircraft appraisal covers before you sign a purchase agreement, and consider making the deal contingent on appraisal and pre-buy results. VREF also warns that a poor appraisal can stall or kill financing, so use a qualified, USPAP-compliant appraiser.
What LTV do aircraft lenders typically allow?
VREF describes typical aircraft LTV ranges of 70% to 85%, with older and large-cabin jets often tighter, and a down payment of usually 15% to 30% of price (or appraised value, if lower). AOPA Aviation Finance says traditional aircraft loans usually require a 15% to 20% down payment. These are published guidance, not market-wide data. Each lender sets its own limit, and use, age and credit move it.
| Loan type | Typical down payment | Implied LTV | Source |
|---|---|---|---|
| Traditional aircraft loan | 15% to 20% | 80% to 85% | AOPA Aviation Finance |
| Typical range across aircraft | 15% to 30% | 70% to 85% | VREF |
| Low-LTV (asset-based) loan | About 40%, some lenders as low as 30% | About 60% to 70% | AOPA Aviation Finance |
The implied LTV column is simple arithmetic: 100% minus the down payment. For the commercial-use view, see aircraft loan down payments by class, where Part 135 use is described at a higher down payment than Part 91.
How do you calculate LTV? A worked example
The numbers below are hypothetical and only show the math. They are not a quote or a market benchmark.
Had the appraisal matched the price, the same 80% limit would have allowed a $320,000 loan and a $80,000 down payment. The $24,000 difference is the cost of the appraisal gap. Closing costs, inspection fees and reserves come on top; see what to prepare before applying.
To see how a larger or smaller loan changes your payment, enter both scenarios in the aircraft finance calculator.
What is a low-LTV aircraft loan, and when does it make sense?
A low-LTV loan is an asset-based loan that finances a smaller share of the aircraft. AOPA Aviation Finance says these loans typically require about 40% down, though some lenders go as low as 30%. In return, the lender focuses on the aircraft, your liquidity and your credit history rather than your full financial picture. AOPA says low-LTV loans normally do not require tax returns or business financial statements and often cut the underwriting period in half.
The trade-off is cash. VREF notes that collateral-based loans trade speed for higher rates, a bigger down payment, stricter covenants, reappraisals and faster repossession if covenants break. They can suit a buyer who has the equity and wants a quick close, but they tie up more capital than a traditional loan. Compare the cost of the extra equity against the time saved.
How does LTV change over the life of the loan?
LTV falls when the loan balance drops faster than the aircraft's value, and rises when the market softens or the aircraft ages quickly. Hypothetically, a $296,000 loan paid down to $280,000 against a re-appraised value of $355,000 is 280 / 355, or about 79%. The same balance against a $310,000 value would be 90%.
That second case matters if your loan carries LTV covenants or a reappraisal clause. Lenders can ask for a principal paydown or extra collateral when the ratio breaches the limit. Balloon structures leave a larger balance at maturity, so your LTV at the end depends on the aircraft's value then; see balloon payments on aircraft loans. Residual value assumptions drive all of this; why lenders care about residual values explains how they are estimated.
How can you improve your LTV position?
- Pay a price the appraisal can support. Compare recent comparable sales and use an independent appraiser before you commit.
- Bring more equity. Each additional percentage point of down payment lowers the LTV and the amount you borrow.
- Keep records complete. Logbooks, damage history and engine times support the appraised value; see financing a used aircraft: age, hours and engine time.
- Ask about covenants up front. Find out whether the lender tests LTV after closing, how often, and what remedy it can require.
- Get quotes at two LTVs. Compare the rate and payment at, say, 80% and 70%, then weigh the savings against the cash you commit.
What should you do before you apply?
Set a target LTV, get an independent value estimate, and calculate your cash need at the lower of price and value. Then compare lender terms with the published aircraft loan rates for your aircraft class. When your numbers are ready, you can start a deal file with JetFinex. Lending terms, covenants and tax treatment vary, so confirm details with your lender and, where relevant, your tax advisor or aviation counsel.
Aircraft Loan Calculator
Monthly payment, total interest and balloon, with a balance chart.
Frequently asked questions
What is a good loan-to-value ratio for an aircraft loan?
Lower is safer for the lender and cheaper for you. VREF describes typical ranges of 70% to 85%, and AOPA Aviation Finance says traditional loans usually need a 15% to 20% down payment. Your lender sets the actual limit for your aircraft and use.
Is aircraft LTV based on price or appraised value?
AOPA Aviation Finance says the down payment is based on either the purchase price or the appraised book value, whichever is lower. Overpaying relative to the appraisal therefore costs you cash, not the lender.
What is a low-LTV aircraft loan?
It is an asset-based loan that lends a smaller share of the aircraft's value. AOPA Aviation Finance says these loans typically require about 40% down, though some lenders go as low as 30%, and they normally skip tax returns and business financial statements.
Does a larger down payment lower my payment?
Yes. A larger down payment reduces the loan amount, so the payment falls with it. Run both scenarios in the aircraft loan calculator and compare the monthly cost against the cash you tie up.
Sources
- AOPA Aviation Finance, Streamlining Aircraft Financing
- VREF, Can I afford that airplane?
- AOPA Aviation Finance, What is the typical down payment percentage on a jet?
This guide is educational and is not tax, legal or investment advice. See our editorial standards and disclosures. Spot an error? Tell us.
