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Kit Financing

Auburntsts

Well Known Member
So I’ve been out of the building game for sometime now. The bank I used for my original construction loan has gotten out of the kit business and now only finances flying aircraft. I heard that NAFCO (but haven’t confirmed) also no longer handles kits. So excluding home equity loans (not an option for me) and personal loans (they typically max out at $100K) what/who are folks using for financing builds today?
 
I emailed NAFCO and their President emailed me back and confirmed they don’t do loans for kits any longer. ☹️
 
I couldnt recommend financing. Have you investigated what it might cost to insure ? Insurance for experimentals appears to be very expensive. I bought a 2007 Arion Lightning (not a Vans unfortunately)... If you buy the SLSA (factory built - new) it is $130k. Its very similar to owning a certified plane, you can rent it out, use it in a flight school etc.

My particular example sold for $46500. The average Jabiru 3300 equipped regular category (EAB) Lightning will sell for about $70k so I expected to have to deal with a few squawks on my particular example and that assumption has been true. I applied for insurance from a reputable broker and the only offer I got was through an EAA affiliated company. $6800 per year for hull and liability based on $46500 agreed value. $2600 per year for liability only (no ground operation covered at all, nor theft).

An RV if one is going to start building now will have a much higher hull value and could take years to complete and you would have to comprehensively insure it for the entire build period to make the financing company happy. If I had done that I would have spent more money on the insurance than the airplane by the time 5-6 years was up, and no-one would be financing the cost of the insurance.

I used a loan against my 401k to pay for the lightning. It had the lowest interest rate I could get anywhere and has a 3 year payback period. For now I am not insuring it at all. If I lose it I guess it will be tough luck. My wife is a student pilot and training in the airplane we bought and will fly it after she gets her ticket. By the time she is a full year into it she will probably have 150 recent hours and we will probably be able at that time to get insurance at a more modest rate. By the time it gets down to $1200/year it is the same as my car insurance (for 1 car) in Michigan. That I can live with, but not $6800/year.

Please research very carefully, there are many pitfalls.
 
Your signature says you have a flying 10. If so, you could take out a loan on that and use the money for another kit. I'm not necessarily recommending it, just suggesting options.

Tim
 
Bank Bank (I'm not making that up) does kit loans. They displayed at Oshkosh in 2021, not sure about this past show. I used them to refinance my flying airplane, but pretty sure they'll do a kit loan.
 
BANK bank will only finance airworthy aircraft. I just called and spoke with the president of the bank. But it looks like a good option for anyone needing an option for flying aircraft.
 
I built my first house myself (acted as General Contractor). Insanely difficult to get a construction loan if you work outside of the trades, as I did. It seemed every banker had been burned at least once by someone throwing in the towel before completion and costing the banker money or aggravation or both. Apparently it is quite difficult to sell a half built house. I suspect that the same applies to EAB aircraft construction. Both of my kits were purchased from such builders. I eventually found a banker that would trust me, but it took a considerable amount of time and effort. I had to focus on the smaller, more personal banks that would look you in the eye and make their own assessment.

Larry
 
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We used lightstream for our construction loan last year. Not sure if we used an unsecured personal loan or put the kit up as collateral, but they gave us a lot of money that funded the purchase of airplane parts.
 
Consider saving those monthly payment to pay from the kit. As it is, it’s not like you can go and pick up the entire project from VANS, unless you are buying it from an individual.
 
Interesting

I find the concept of “just save up until you can buy the kit” interesting, from a numbers standpoint.

How much can one save monthly to afford to buy a $60k kit, $50k avionics, and a $60K engine?

Obviously, people have done it; what interests me is how they have done it and we’re still able to build when they were relatively young. Even saving 1k per month, it would take years to save for even just the aircraft kit. After mortgage, food, utilities, retirement, and other expenses, it would seem that it would be a stretch to bank even that amount. Throw in a couple of kids…well, you know…

Course I guess if one gave up Starbucks, that would be be almost half the $1k!:D
 
I find the concept of “just save up until you can buy the kit” interesting, from a numbers standpoint.

How much can one save monthly to afford to buy a $60k kit, $50k avionics, and a $60K engine?

Obviously, people have done it; what interests me is how they have done it and we’re still able to build when they were relatively young. Even saving 1k per month, it would take years to save for even just the aircraft kit. After mortgage, food, utilities, retirement, and other expenses, it would seem that it would be a stretch to bank even that amount. Throw in a couple of kids…well, you know…

Course I guess if one gave up Starbucks, that would be be almost half the $1k!:D

At some point you have to pay the piper. It all depends upon how you look at it. If it will take 10 years to save enough to buy everything needed, it will probably take 15 years to pay back the loan if you go that route. Interest costs when added up over the full term tend to be much higher than people account for. Obviously being able to enjoy while you pay has it's merits, but if funds are tight not sure that is the best way to afford it.

My son just bought a house for $540K. I was giving him some guidance on 15 year vs 30 year. Like many, he had never run the numbers and was shocked when I told him that he would ultimately be paying over $900K for that house on the 30 year plan. With housing, there are tangible savings to help offset that cost, like rent avoidance, equity growth, etc. It is kind of hard to imagine EAB prices rising from this point for a lot of years. Their worth 50% more than 3 years ago and that kind of growth just screams for a reset of some form.

I also wonder how young guys do this.

Larry
 
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I find the concept of “just save up until you can buy the kit” interesting, from a numbers standpoint.

How much can one save monthly to afford to buy a $60k kit, $50k avionics, and a $60K engine?

Obviously, people have done it; what interests me is how they have done it and we’re still able to build when they were relatively young. Even saving 1k per month, it would take years to save for even just the aircraft kit. After mortgage, food, utilities, retirement, and other expenses, it would seem that it would be a stretch to bank even that amount. Throw in a couple of kids…well, you know…

Course I guess if one gave up Starbucks, that would be be almost half the $1k!:D

This is to some degree a cultural thing, American culture generally has a much higher tolerance for being in debt, sometimes up to the neck. Of course there are things in life that one might need to barrow otherwise it becomes next to impossible to save enough to buy it outright, a house is a good example of that.
I believe if we can curb our enthusiasm a bit, often times we can buy that boat or car or plane without becoming slave to the banks.

So, here is how my flying hobby was budgeted. I started with a smaller, cheaper project. A $20K flying object was a super expensive item for me that I could barely afford, but that became a stepping stone for my flying hobby, meanwhile I kept on the saving project. A couple of years pass, with the money that I retained from that plane and some of the saving, I built my first RV which was very expensive for me but I managed it without barrowing any.
This process have been repeated at least a couple of more times.

Of course there is a lot more fun to have that brand new car or plane in the same day that you desire to have it :D
 
Are the finance companies that no longer handle kit loans also not handling the engine loans? I had been told some banks would provide a loan on the engine, using the completed plane as collateral — but perhaps that is no longer the case.
 
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