Aircraft Affordability Takes Off as Federal Interest Rates Drop

With rates down from 2023's inflation-fighting levels, consumers considering an aircraft purchase are in for a deal now that federal interest rates have decreased.

Why Are Rates Down?

The change in federal interest rates comes after the Federal Open Market Committee (FOMC) met with the Board of Governors of the Federal Reserve System in September to address inflation.

The committee's long-term goals are to achieve higher employment numbers and bring inflation down to 2 percent.

The Bureau of Labor Statistics' Consumer Price Index report shows annual inflation for all items in the U.S. is averaged at 2.4 percent as of September. September, August, and July each saw 0.2 percent inflation increases for all items each month.

In the FOMC meeting, the committee decided to lower the federal funds rate by 0.5 percent to 4.75-5 percent

"The Committee will continue reducing its holdings of Treasury securities and agency debt and

agency mortgage‑backed securities," FOMC's news release on the rate drop stated. "The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective."

The next set of FOMC meetings are scheduled for November 7-8.

What Does This Mean for Aircraft Buyers?

Lower interest rates typically means better payment plans on big purchases, aircrafts included.

The 0.5 percent drop can mean hundreds of dollars saved in monthly payments, depending on the amount of an individual's down payment and the term of their loan.

FLYING Finance's Aircraft Finance Calculator can be used to determine an affordable payment plan for prospective buyers. This tool allows users to configure their ideal purchase price, loan term, down payment, and adjust for the lowered interest rates to calculate what their monthly payment would be.

For example, a 20-year term for an aircraft purchased for $1 million with a $200,000 (20 percent) down payment at a 6.75 percent interest rate would cost $6,083 per month. These same values at a 7.25 percent interest rate would cost $6,323 instead—$240 more per month.

Additional resources on aircraft purchasing are available at FLYING Finance.

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