Aircraft Financing Terms: A–Z Glossary of Loan, Title, Tax and Ownership Terms
Plain-English definitions of 59 terms you'll meet when you finance, buy, register, insure and depreciate a piston aircraft. Each entry links to the guide that covers it in depth. Figures are as of September 2026.
Key numbers behind these terms (as of September 2026)
| Item | Current figure | Source |
|---|---|---|
| Piston aircraft loan rates | About 7% to 10%; AOPA 6.99–9.99%; FLYING Finance certified piston from 7.01% | AOPA, FLYING Finance |
| Prime Rate | 7.00% | After the Sept 16, 2026 FOMC increase |
| Minimum down payment | 15% post-1960 singles; 20% pre-1960; 15–30% twins | AOPA |
| Maximum term | 20 years for singles on loans of $75,000+; 10–15 years for twins | AOPA |
| FAA registration | 7 years; $5 | 14 CFR 47.40 |
| Recording a security agreement | $5 per item of collateral | FAA Registry |
| Section 179 (tax years beginning 2026) | $2,560,000 limit; phase-out from $4,090,000 | Rev. Proc. 2025-32 |
| Sport pilot aircraft limit | VS1 of 59 KCAS or less; up to 4 seats; 1 passenger | 14 CFR 61.316 |
Worked example: how amortization splits a payment
A $150,000 loan at 7.75% over 20 years has a payment of $1,231.42 a month. In month one, interest is $150,000 × 7.75% ÷ 12 = $968.75, so only $262.67 goes to principal. Over the full term, interest totals $145,541. That's why early payoff or a larger down payment saves far more than the rate difference alone suggests. Try your own numbers in the aircraft loan calculator.
0–9
100-hour inspection
An inspection required under 14 CFR 91.409(b), in addition to the annual, for aircraft that carry people for hire or are used to give flight instruction for hire. A privately flown airplane does not need one, but a buyer should expect them in the logs of a former rental or training aircraft. More: Annual inspection costs.
8050-1 (Aircraft Registration Application)
FAA AC Form 8050-1, which the new owner files with the FAA Aircraft Registry along with evidence of ownership. The second copy, the "pink copy", serves as temporary operating authority within the United States while the application is processed. More: FAA registration guide.
8050-2 (Aircraft Bill of Sale)
FAA AC Form 8050-2, the standard bill of sale that transfers ownership of a U.S.-registered aircraft. The seller signs it, and it is filed with the FAA Registry so the buyer can register the aircraft. More: Aircraft title and escrow.
8050-41 (Conveyance Recordation Notice)
The notice the FAA Registry returns after it records a conveyance, such as a lender's security agreement. When the loan is paid off, the lender can use it to release the lien; a signed release letter is also acceptable. More: The FAA Registry and loan security.
8050-98 (Aircraft Security Agreement)
An optional FAA sample security agreement. Most lenders use their own form, but any agreement recorded under 14 CFR Part 49 must identify the parties and the collateral by make, model, serial number and N-number, and carry the debtor's signature. Recording costs $5 per item of collateral. More: Collateral and security agreements.
A
AD (Airworthiness Directive)
A legally enforceable FAA rule, issued under 14 CFR Part 39, that requires owners to correct an unsafe condition in an aircraft, engine, propeller or appliance by a set method and deadline. Recurring ADs add ongoing cost, so check the AD compliance record before you buy. More: Reading aircraft logbooks.
Agreed value
A hull insurance approach in which the insurer and owner agree up front what the policy pays for a total loss. Lenders commonly require the agreed value to be at least the outstanding loan balance. More: Aircraft insurance requirements.
Amortization
The schedule that splits each loan payment between interest and principal. Early payments are mostly interest, so the balance falls slowly at first. See the worked example near the top of this page. More: Aircraft loan terms explained.
Annual inspection
The inspection a standard-category aircraft needs every 12 calendar months under 14 CFR 91.409(a), performed by an A&P mechanic with Inspection Authorization (IA). Lenders expect a current annual at closing. More: Annual inspection costs.
Appraisal
An independent valuation of an aircraft based on comparable sales, equipment, damage history, records and engine time. Lenders use it to set the maximum loan amount. More: Appraisals and loan terms.
APR (annual percentage rate)
The yearly cost of credit, including interest and certain finance charges. Compare lender quotes by APR as well as note rate. As of September 2026, piston aircraft loan rates generally start around 7% for well-qualified borrowers and run to roughly 10%. More: Understanding aircraft loan rates.
B
Balloon payment
A lump sum due at the end of a loan whose monthly payments were calculated on a longer amortization than the actual term. It lowers the monthly payment but leaves a large balance to pay off or refinance at maturity. More: Balloon payments in aircraft loans.
Bonus depreciation
A first-year federal tax deduction for qualifying business property. The One Big Beautiful Bill Act made 100% bonus depreciation permanent for eligible property acquired after January 19, 2025, including used aircraft on their first use by the taxpayer. The aircraft must be used more than 50% for qualified business. Confirm with a CPA. More: Aircraft depreciation and tax.
Breach-of-warranty endorsement
An insurance endorsement that protects the lender's interest even if the insured violates a policy condition, for example by letting an unapproved pilot fly. The lender is still paid; the owner is not. Lenders require it. More: Aircraft insurance requirements.
C
Cape Town Convention
An international treaty, in force for the U.S. since March 1, 2006, that registers interests in aircraft on the International Registry. It covers airframes type-certificated for at least 8 persons including crew, or more than 2,750 kg of goods, and engines of at least 550 hp. Most piston singles and light twins are not covered. More: International aircraft purchases.
Condition inspection
The annual inspection required by the operating limitations of light-sport and experimental aircraft. On an S-LSA it is done by an A&P or a light-sport repairman with a maintenance rating; on an E-LSA or homebuilt, an owner holding the appropriate repairman certificate may do it. More: Light sport aircraft buyer’s guide.
Cross-default
A loan clause that treats a default on another obligation, such as a second loan with the same lender, as a default on this loan too. Read it before you pledge the aircraft alongside other debts. More: Aircraft loan documents explained.
D
Debt-to-income ratio (DTI)
Total monthly debt payments, including the proposed aircraft loan, divided by gross monthly income. Lenders use it to judge whether you can carry the payment. Thresholds vary by lender. More: Building a financial profile for ownership.
Down payment
The cash you put toward the purchase. AOPA Aviation Finance's published minimums are 15% for post-1960 single-engine aircraft, 20% for pre-1960 aircraft, and 15% to 30% for multi-engine aircraft, depending on age. More: Down payment strategies.
E
E-AB (experimental amateur-built)
An aircraft with an experimental airworthiness certificate whose major portion was built by amateurs for education or recreation, usually called the 51% rule. Fewer lenders finance them; FLYING Finance listed a 7.78% starting rate for experimental and kit aircraft in September 2026. More: Financing experimental aircraft.
E-LSA (experimental light-sport aircraft)
A light-sport aircraft holding an experimental certificate, often a kit version of a factory design or a converted S-LSA. It cannot be used for paid flight instruction, and its owner can qualify to perform the annual condition inspection. More: Light sport aircraft buyer’s guide.
Escrow
A neutral third party that holds the buyer's funds and the signed documents until every closing condition is met, then releases them together. Aviation escrow and title companies often operate near the FAA Aircraft Registry in Oklahoma City. More: Aircraft title and escrow.
F
Fixed rate
An interest rate that stays the same for the life of the loan, so the payment never changes. Most piston aircraft loans are fixed-rate. More: Fixed vs variable aircraft loans.
Fly-away exemption
A state sales or use tax exemption for an aircraft bought in the state and removed within a set period. Florida, for example, exempts nonresident buyers who remove the aircraft within 10 days, or 20 days if repairs are needed. Rules vary by state. More: Aircraft sales tax by state.
Form 337
FAA Form 337, Major Repair and Alteration, which documents major repairs and alterations such as many avionics or engine installations. Missing 337s for major changes are a pre-buy red flag and can hold up an appraisal. More: Reading aircraft logbooks.
G
Guaranty (personal guaranty)
A promise by an individual to repay a loan if the borrower, often an LLC, does not. Lenders usually require one from the principal owners when the aircraft is owned by an entity. More: Co-signers and guarantors.
H
Hull coverage
Physical-damage insurance on the aircraft itself, on the ground and in flight. Every lender requires it, with the lender named as loss payee and a breach-of-warranty endorsement. More: Aircraft insurance requirements.
Rather talk it through?
A financing specialist can explain any term in a quote or loan document and compare options from lenders in our network.
L
Lien
A legal claim against an aircraft that secures a debt. It could be a lender's recorded security interest, or a mechanic's lien filed under state law for unpaid work. A title search finds recorded liens before closing. More: Aircraft lien searches.
Listed property
A federal tax category (IRC section 280F) that includes aircraft. If qualified business use is 50% or less, the aircraft must be depreciated under the slower ADS method, and bonus depreciation and Section 179 are unavailable. Confirm with a CPA. More: Business aircraft tax advantages.
Loan-to-value (LTV)
The loan amount divided by the aircraft's value. An 85% LTV means 15% down. FLYING Finance's September 2026 guidelines list up to 85% for new certified aircraft and S-LSA, up to 82% for used certified aircraft under 10 years old, and 70% to 75% for vintage aircraft. More: Down payment strategies.
Loss payee
The party named on an insurance policy to receive claim payments for damage to the aircraft. On a financed aircraft, that is the lender, up to the loan balance. More: Aircraft insurance requirements.
LSA (light-sport aircraft)
Before MOSAIC, a defined class of aircraft limited to 1,320 lb, two seats and 120 knots. That definition was removed on July 24, 2026 and replaced by the light-sport category in 14 CFR Part 22, which has no maximum weight, allows up to four seats and caps VS0 at 61 KCAS and VH at 250 KCAS. More: MOSAIC light sport aircraft financing.
M
MACRS
The IRS Modified Accelerated Cost Recovery System. Business aircraft flown under Part 91 are generally 5-year property; aircraft used in charter or other common or contract carriage are 7-year property. Confirm with a CPA. More: Aircraft depreciation and tax.
MOSAIC
The FAA's Modernization of Special Airworthiness Certification rule, published July 24, 2025. Sport pilot changes took effect October 22, 2025, and the new light-sport category took effect July 24, 2026. It lets sport pilots fly many certified airplanes that were off-limits before. More: MOSAIC light sport aircraft financing.
N
N-number
The U.S. registration mark painted on the aircraft and listed on its registration. A special (custom) N-number costs $10 to reserve with the FAA Registry. More: FAA registration guide.
P
Part 91
The FAA's general operating rules, which cover private and most business flying that is not for hire. Most owner-flown piston aircraft operate under Part 91. More: The FAA’s role in financing and ownership.
Part 135
The FAA rules for commuter and on-demand (charter) operations for compensation, which require an operating certificate. Lenders underwrite charter use differently, and tax depreciation is generally 7-year rather than 5-year. More: Business aircraft tax advantages.
Pre-buy inspection
An independent inspection and records review, done before you close by a mechanic you choose who knows the type, not the seller's shop. It is your best protection against expensive surprises. More: Pre-buy inspection checklist.
Prepayment penalty
A fee for paying a loan off early, sometimes on a sliding scale that shrinks each year. Terms vary by lender, so ask before you sign if you might sell or refinance. More: Refinancing your aircraft loan.
Pre-qualification
A preliminary review of your credit, income and down payment that estimates what you can borrow before you have a specific aircraft. Through this site's financing partner it typically takes 1 to 3 business days. More: Aircraft loan pre-approval process.
R
Rate lock
A lender's commitment to hold a quoted rate for a set period while the purchase closes. It matters when rates are moving: the Federal Reserve raised its target range to 3.75%–4.00% on September 16, 2026. More: Understanding aircraft loan rates.
Registration (Certificate of Aircraft Registration)
The FAA certificate showing who owns a U.S. aircraft. It expires seven years after the last day of the month in which it was issued, can be renewed in the six months before expiration, and costs $5. More: FAA registration guide.
S
Section 179
A tax election to expense qualifying business equipment, including aircraft used more than 50% for business in the year placed in service. For tax years beginning in 2026 the limit is $2,560,000, reduced once qualifying purchases exceed $4,090,000. Confirm with a CPA. More: Tax strategies for piston aircraft owners.
Security agreement
The document that gives a lender a security interest in the aircraft. It is recorded with the FAA Registry under 14 CFR Part 49 so the lender's lien has priority. The fee is $5 per item of collateral. More: Collateral and security agreements.
SFRM (since factory remanufacture)
Hours since the engine was remanufactured or rebuilt by its manufacturer to new-engine tolerances. Buyers often value these engines above field overhauls, which are typically done to service limits. More: Engine overhaul financing.
S-LSA (special light-sport aircraft)
A factory-built light-sport aircraft sold ready to fly with the manufacturer's statement of compliance with industry consensus standards. It may be used for rental and flight instruction, and it is maintained to the manufacturer's instructions. More: Light sport aircraft buyer’s guide.
SMOH (since major overhaul)
Hours flown since the engine's last major overhaul. Read against the manufacturer's TBO, it is one of the biggest drivers of a piston aircraft's value and of how much a lender will advance. More: Engine overhaul financing.
SNEW (since new)
Hours since the engine, propeller or component was new from the factory, with no overhaul yet. More: Engine overhaul financing.
Sport pilot certificate
A pilot certificate that, since October 22, 2025, allows flying airplanes with a clean stall speed (VS1) of 59 knots CAS or less at maximum takeoff weight, up to four seats and one passenger, with no weight limit. Holders may use a U.S. driver's license in place of a medical, subject to conditions. More: MOSAIC light sport aircraft financing.
STC (Supplemental Type Certificate)
FAA approval for a major change to a type-certificated aircraft, engine or propeller, such as an engine conversion, a gross-weight increase or an avionics installation. Confirm that the STC paperwork and any Form 337 are in the records. More: Avionics upgrade financing.
T
TBO (time between overhauls)
The engine manufacturer's recommended hours, and sometimes calendar years, between overhauls. For most Part 91 operations of standard-category aircraft it is a recommendation rather than a legal limit, but it drives value, appraisals and lender appetite. Light-sport aircraft maintained to manufacturer instructions may have to treat it as due. More: Engine overhaul financing.
Title search
A review of the FAA Registry file (and the International Registry, where Cape Town applies) for the chain of ownership, recorded liens and unreleased security interests. It is done before closing, usually by an aviation title company. More: Aircraft lien searches.
TTAF (total time airframe)
Total hours the airframe has flown since new. High TTAF matters most with age-related inspection requirements and for former training aircraft. More: Reading aircraft logbooks.
U
UCC-1 financing statement
A state-level filing under the Uniform Commercial Code that gives public notice of a lender's security interest. For the aircraft itself, recording with the FAA Registry is what protects the lender. A lender may also file a UCC-1 against the borrowing entity or related collateral. More: Collateral and security agreements.
Use tax
A state tax owed when sales tax was not paid at purchase and the aircraft is based or used in the state. Illinois, for example, charges 6.25% of the greater of price or fair market value on private purchases, filed on Form RUT-75 within 30 days. More: Aircraft sales tax by state.
V
Variable rate
An interest rate that resets periodically against an index such as the Prime Rate (7.00% as of September 2026), so the payment can change. It is less common on piston aircraft loans than a fixed rate. More: Fixed vs variable aircraft loans.
VS0
Stall speed in the landing configuration. The light-sport category that took effect July 24, 2026 limits new light-sport airplanes to a VS0 of 61 knots CAS or less. More: MOSAIC light sport aircraft financing.
VS1
Stall speed in a specified configuration, usually clean (flaps up). Under 14 CFR 61.316, a sport pilot may fly an airplane whose VS1 is 59 knots CAS or less at maximum certificated takeoff weight. Take it from the airplane's POH or AFM, converted from indicated to calibrated airspeed. More: MOSAIC light sport aircraft financing.
How this glossary differs from related guides
This page gives short definitions across financing, title, insurance, maintenance and tax. For a document-by-document walk through a loan package, see aircraft loan documents explained. For how rates are set, see understanding aircraft loan rates, and for current rate ranges see aircraft loan rates. New buyers should start with aircraft financing 101. Tax terms here are general explanations, so confirm with a CPA or aviation attorney for your situation.
Frequently asked questions
What does SMOH mean on an aircraft listing?
SMOH means "since major overhaul": the hours the engine has run since its last major overhaul. Buyers and lenders read it against the manufacturer's time between overhauls (TBO). An engine with 1,800 SMOH on a 2,000-hour TBO is near its overhaul, which lowers the aircraft's value and can reduce what a lender will advance. SFRM and SNEW describe factory-remanufactured and new engines.
What is a breach-of-warranty endorsement?
It is an insurance endorsement that protects the lender if the insured breaks a policy condition, for example by letting an unapproved pilot fly. The insurer still pays the lender up to its interest, even though the owner's own claim may be denied. Lenders require it on every financed aircraft, along with hull coverage naming the lender as loss payee.
What is FAA Form 8050-2?
AC Form 8050-2 is the FAA Aircraft Bill of Sale, the standard document that transfers ownership of a U.S.-registered aircraft. The seller signs it and it is filed with the FAA Aircraft Registry, together with the buyer's registration application on AC Form 8050-1. Lenders and escrow agents usually handle both at closing.
What does LTV mean in aircraft financing?
LTV, or loan-to-value, is the loan amount divided by the aircraft's appraised value. An 85% LTV means you put 15% down. As of September 2026, FLYING Finance lists up to 85% for new certified aircraft and S-LSA, up to 82% for used certified aircraft under 10 years old, and 70% to 75% for vintage aircraft. AOPA's minimum down payment on post-1960 singles is 15%.
How long is the pink copy valid?
There is no longer a 90-day limit. Under 14 CFR 47.31(c), the second copy of the registration application is valid within the United States until the owner receives the registration certificate or the FAA denies the application. It cannot be used once 12 months have passed since the first application after the ownership transfer, and it is not valid outside the U.S.
Does the Cape Town Convention apply to piston aircraft?
Usually not. The Cape Town Convention covers airframes type-certificated to carry at least eight persons including crew, or more than 2,750 kg of goods, and engines of at least 550 rated takeoff horsepower. Most piston singles and light twins fall below those thresholds, so their liens are protected by recording with the FAA Registry rather than the International Registry.