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Leasing and finance

Leasing in aviation is not a way to “buy without money”, it is a tool for managing liquidity. It makes sense when your money earns more in your main business than the financing costs.

Forms of financing

What the lessor looks at

What to read in the contract

The clauses that matter are usually not the rate: the return conditions and the required condition of the aircraft at the end of the term, limits on annual flight hours and on where you may fly, the insurance requirements and who the beneficiary is, the procedure in the event of damage, the terms of an early buyout.

Return under an operating lease is the most underestimated item: the aircraft has to come back in the agreed condition, and bringing it to that condition sometimes costs as much as several months of payments.

What the calculation looks like

What has to be worked out is not the payment but the full cost of ownership over the term of the deal: the payments, insurance to the lessor's requirements, maintenance to the agreed scope, the cost of bringing the aircraft to return condition, and the tax consequences.

That result is then compared with buying with your own money — taking into account how much your money earns in your main business. It is often this question, rather than the rate, that decides the matter.

Frequently asked questions

How large a down payment does an aircraft lease require?

Usually from 20–30%, but the range is wide: it depends on the type and age of the aircraft, the term of the deal and the borrower. For rare and older types, financing is harder to obtain.

Can an aircraft be chartered out while it is on lease?

As a rule, yes — with the lessor's consent and subject to the requirements on the operator and on insurance. This point has to be built into the contract in advance.

Which works out better — leasing or buying with your own money?

It is settled on the numbers: the cost of financing against what your money returns in your main business, taking into account the tax consequences of both scenarios.

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See also:
VAT and taxes on ownershipBuying a business jetAircraft cost audit
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