Aircraft Financing & Equity: The Depreciation Crossover Methodology
Loan balance and aircraft value move on two independent schedules. Real aircraft depreciate steepest right after purchase and taper with age — not in a flat straight line, and not without real dated cost events like a CAPS repack or an engine overhaul. Here is the corrected model, calibrated to published SR22T value-retention data, with every assumption shown.
The Two Curves
When you finance an aircraft, two things happen on two different schedules. Your loan balance goes down in a fixed, predictable line set by your amortization schedule. The aircraft’s market value moves on its own schedule, set by the market, not by your lender. Equity is the gap between the two — value minus balance — and where that gap goes negative, stays thin, or recovers is what actually matters to an owner who needs to sell, trade up, or ride out a downturn.
The loan side of this is exact math. The value side is where most depreciation charts get lazy — and where this page differs from the version it replaces.
Why the Value Curve Isn’t Smooth (or Flat)
Aircraft depreciation is not linear. Every credible industry source on the subject agrees on the shape: value drops fastest in the first few years of ownership, then the rate of loss decelerates as the aircraft ages and settles into a stable residual band. A flat annual percentage — the shortcut this page used before — understates the real early-ownership hit and overstates value retention over the following decade. This revision replaces that flat rate with a three-tier schedule: a steeper rate for years 1–3, a moderate rate for years 4–8, and a gentler, near-residual rate from year 9 onward — on top of the same one-time delivery-day adjustment as before.
How This Compares to Broader Industry Depreciation Data
That tiering is deliberately calibrated to the Cirrus SR-series specifically, not to general aviation as a whole. Broader industry data runs much steeper: light and midsize jets can lose 14–30% of value in year one alone (Flycraft), and a generic new-aircraft rule of thumb of 10–15% year-one loss shows up across multiple sources. Applying either of those to an SR22T would overstate the hit — the SR-series is well documented as an unusually strong holder of value within the piston class, thanks to sustained demand, no meaningful used-market glut, and the CAPS system’s pull with safety-conscious buyers. A direct competitor’s own published SR22T cost-of-ownership data cites 2–4% annual depreciation for well-maintained examples and roughly 50–60% value retention at year 10 — and that 50–60% figure is the actual calibration target used here for the mid scenario, because a flat 2–4%/yr rate alone doesn’t compound down far enough to reach it. The gap between those two published numbers is exactly the front-loaded shape this revision now models explicitly.
The CAPS Repack and Engine Overhaul Notches
On top of that base curve, two real, dated maintenance events still apply as discrete markdown-and-partial-recovery notches, because they behave differently from ordinary depreciation: a foreseeable bill gets priced in before it’s due, then partially prices back out once the work is done.
A few smaller factors move real resale value but are too owner-specific, or too small, to warrant their own notch on this chart: propeller overhaul (roughly half the engine’s interval and cost, often bundled with the engine event), the CAPS line-cutter replacement (6-year interval, comparatively minor cost), avionics and database currency plus ADS-B/software compliance, and paint or interior refresh, which is largely discretionary. A buyer evaluating a specific aircraft should still ask about all of these — they simply aren’t modeled here as discrete chart events.
Worked Example: Cirrus SR22T (G6/G7)
The chart and figures below use one representative example so the mechanics are concrete. Change the aircraft, price, rate, term, or down payment and every number moves.
Rate shown is FLYING Finance’s live Certified Piston reading from the Aircraft Loan Rate Index. Price is a representative market point for an SR22T G6/G7, not a listing, quote, or appraisal.
Three Disclosed Scenarios
Per FLYING Finance’s methodology decision, the high, mid, and low bands on this chart are disclosed modeled assumptions — not derived from Vref, Aircraft Bluebook, JETNET, or FLYING Finance’s own closed-loan data. The mid scenario is calibrated to land at roughly 50–60% value retention at year 10, matching the published SR22T benchmark cited above; low and high bracket it on either side. All three carry the same two cost-event notches.
| Scenario | Initial Adjustment | Years 1–3 | Years 4–8 | Years 9–20 | 10-Yr Retention |
|---|---|---|---|---|---|
| Low | 88% of price | −9.0%/yr | −5.0%/yr | −3.0%/yr | 47.7% |
| Mid | 92% of price | −7.0%/yr | −4.0%/yr | −2.0%/yr | 57.1% |
| High | 96% of price | −4.0%/yr | −2.5%/yr | −1.0%/yr | 72.0% |
Retention figures are the modeled value as a percentage of original price, before the CAPS/engine notches, at year 10. Low and high are not published benchmarks — they’re modeling assumptions built to bracket a plausible range around the mid scenario’s cited target.
The Equity Low-Water Mark
With the front-loaded curve in place, the honest answer to “can equity go underwater” is yes — and at this page’s baseline 15% down payment, it does in two of the three scenarios. In the mid scenario, equity turns negative in year 4, bottoms out at −$17,062 in year 5, and doesn’t fully recover until year 9. In the low scenario, the underwater period is longer and deeper — negative from year 2 through year 12, with a low-water mark of −$87,436 in year 6, before the loan paydown catches up. Only the high scenario stays continuously positive, bottoming at a still-comfortable $77,890 in year 4. In every scenario, the worst point comes from the steep early-ownership depreciation itself, not from the CAPS repack or engine overhaul — those notches add secondary dips later on, but the front-loaded curve is what actually drives the low-water mark.
How Down Payment Size Changes the Low-Water Mark
| Down Payment | Amount Down | Low-Water Mark | Year |
|---|---|---|---|
| 15% | $127,500 | −$17,062 | Year 5 |
| 20% | $170,000 | $18,611 | Year 6 |
| 25% | $212,500 | $53,679 | Year 6 |
Mid scenario used throughout. At 20% down, the mid scenario stays only barely positive — a softer market (the low scenario) still pushes a 20%-down buyer about $53K underwater. Even 25% down doesn’t fully escape a soft market: the low scenario still runs roughly $19K negative, though the shortfall is far shallower and shorter than at 15% or 20% down. A larger down payment raises the floor of the equity curve at every point on the timeline; it doesn’t just lower the monthly payment.
What This Means for Buyers
- Yes, there’s a real scenario where you owe more than the aircraft is worth — and under normal-to-soft market conditions (the mid and low scenarios), it’s the expected outcome at 15–20% down for several years, not a tail risk.
- The early-ownership value drop, not the CAPS repack or the engine overhaul, is what drives the worst point on the equity curve in every scenario here. Budget for a real, front-loaded “delivery-day-forward” value decline, in addition to those two dated maintenance costs.
- Down payment size matters more than this page previously showed: even a conventional 20–25% down payment only barely avoids negative equity in the mid scenario, and doesn’t fully avoid it in a softer market.
- These are illustrative bands calibrated to a published SR22T-specific benchmark, not an appraisal of any aircraft. For a specific aircraft’s value, use Vref, Aircraft Bluebook, or a qualified appraiser.
Methodology & Disclaimer
Loan balance: standard amortization formula, exact for the stated loan amount, rate, and term. This is the same math any lender uses; it is not an estimate.
Modeled value curve: a general, illustrative curve only — not an appraisal, not a valuation of any specific aircraft, and not a prediction or promise of resale value. It steps down once at delivery, then declines on a three-tier annual schedule that is steepest in years 1–3, moderate in years 4–8, and gentlest from year 9 onward — reflecting the broad industry consensus that aircraft depreciation is front-loaded and decelerates with age, not linear. The mid scenario’s tiering is calibrated so 10-year retention lands at roughly 50–60% of original price, matching a published SR22T-specific benchmark (cited below), rather than an arbitrary flat rate. On top of that base curve, the model applies the two disclosed maintenance-event notches. Actual values are driven by market conditions, aircraft condition, avionics currency, damage history, and the specific circumstances of a transaction, and can rise as well as fall.
Why not a jet-market or generic-aircraft depreciation rate: published figures for business jets (14–30% first-year loss) and for new aircraft generally (10–15% first-year loss) run considerably steeper than what’s used here. Those figures reflect asset classes — large jets with heavy maintenance cliffs and thinner buyer pools, or aircraft in general — that depreciate faster than the Cirrus SR-series specifically, which is well documented as an unusually strong value-holder within the piston class.
Cost-event figures: the CAPS repack cost and interval are cited to AVweb and Narber Aviation’s published cost-of-ownership research; the engine overhaul cost and TBO are drawn from Continental’s published TSIO-550-K specifications. Both are refined to a single working figure for chart purposes and depend on the disclosed utilization assumption of roughly 125 hours a year — an owner who flies more will reach the engine overhaul sooner.
Price used: $850,000 is a representative market price point for a Cirrus SR22T (G6/G7) used in this worked example; it is not a listing, quote, or appraisal for any specific aircraft.
This page is for illustration and education only. It is not financial, investment, tax, or appraisal advice. For a valuation of a specific aircraft, consult Vref, Aircraft Bluebook, or a qualified appraiser. For financing terms specific to your situation, apply with FLYING Finance or contact our team directly.