High-net-worth individuals and large companies, particularly those who travel internationally, often face an important decision. Deciding whether to lease or buy an airplane can be a difficult decision for several reasons.
The decision to buy or lease an aircraft is one that you should discuss with several people, including your accountant, and your lawyer. There are pros and cons to each.
Why Buy an Airplane?
Research has shown that, of all of the individuals and entities that use private jets, only a minority owns them outright. The main reason for this is the extraordinary cash outlays required for buying an aircraft. However, this short-term cost might prove better for you in the long-run.
You can expect to pay anything between $3-100 million on a private jet, depending on the size, age, and specs. Even new piston aircraft can reach to high 6 figure purchase price. Financing is often a significant factor, even for the wealthy. A good source for locating the proper lender or financial institution is the National Aircraft Finance Association (NAFA).
Aircraft ownership has some advantages over a lease. You are limited to what you do with the plane. In most cases, a leasing company will define whether or not you can charter the aircraft when you are not using it. Another advantage is when you purchase the plane the improvements and maintenance you do along the way are to your benefit.
The most significant benefit to ownership is the fact that you’ll get tax advantages. Tax benefits can are achievable through accelerated depreciation, or bonus depreciation, which in turn often offsets that upfront deposit. Be sure to check with your CPA.
If you want to upgrade or sell, there is not a contract preventing that from occurring. Things change quickly with corporate travel, so ownership might make more sense if you are unsure just how long you plan to own a plane.
Why Lease an Airplane?
If you’re using a jet for business purposes, leasing an aircraft could have its advantages. Leasing an aircraft can provide the lift you require while allowing you to maintain your working capital. By avoiding a large cash outlay and avoiding some other unknowns like future resale ability. The aircraft lease will enable you to enjoy all the benefits of aircraft “ownership” with a game plan to walk away before the honeymoon even starts.
Hopefully, these pros and cons will help you decide whether to lease or buy an airplane. If you’re still not sure how to make the right decision, then don’t hesitate to get in touch with us for all of the expert advice on aircraft valuations.