What to Consider While Leasing an Airplane

Top 5 Points to Consider While Leasing an Airplane

There are various ways to finance a fleet or airlines or just a private jet for yourself. Bank credits, asset-based loans, aviation loans, and leasing are some of the top-rated methods people use while buying an airplane. 

Although, if you look at the data of most airline companies, you’d find out that they depend primarily on leasing their new additions from big financial servicing giants. But as you proceed with the option of financing an aircraft, you should always keep the following things in mind as you sign the contract document. 

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Budget

The first and foremost thing you need to consider while leasing an aircraft is your budget. The leasing companies do not let you cover the entire amount under the contract. The process is quite lengthy as you first will need to pay a certain amount to the manufacturing unit to start signing the deal. After that, you can approach a bank or a third-party entity to purchase the aircraft on your behalf. 

At this point, you will need to calculate the amount you really would like to spend on the plane, paperwork, and other extra added charges. All of these should very well fit into your budget before you get going with the deal, as once you lease the aircraft, you will need to be strict with all the payments and tabs. 

If calculating all the details and determining the budget is too difficult, you can always consider seeking some professional help. An experienced agency like Aerospace Union is a good example.

Timeline

The financial leasing companies generally offer 15, 20, to 25 years as a money repayment time. During that period, you as a borrower/ buyer need to pay the regular installments. After completing the stipulated period, you can rightfully become the owner of the aircraft. While leasing the airplane, you need to consider this timeline as it amounts to the total number of years throughout which you will be paying out a regular sum of money to the lender. 

If you are in your mid-forties, you should try to minimize the number of years you will pay the lease. Also, assuming that the interest will only go up higher if you go for a lengthier payback time, you will lose a lot more money than you expected. 

Location

The financial service that you are leasing the agreement to also plays a pivotal role in deciding the terms and conditions. Countries like Ireland, Brazil, China, and Hong Kong offer better opportunities when it comes to aircraft leasing. You will always get additional offers, flexibility in payment methods, and various other options that you can use as collateral

Countries, where business outsourcing is not accepted at a greater level, are the places you should avoid. So, if you are open to traveling to different locations to get the best deal, you must get a quote from various companies that have built up the goodwill of their own. Analyze the terms and conditions of the company and the perks offered by the country so that you can always get a seamless experience!

Other Charges

Many times, leasing companies do not discuss the other additional charges included with your aircraft. For example, the engine of the aircraft is not covered under the leasing agreement. 

You would always have to pay the additional operational cost, fuel charges, maintenance charges, and so on. On top of all of that, if you have to pay the principal amount along with the interest rate, you are probably better off with a leasing agreement. 

Companies that are honest in their transactions and take you through the pros and cons will tell you everything about the leasing agreement so that you can be the best judge of your case. 

Interest Rate

Different companies charge different rates of interest when you lease an airplane. On most occasions, the interest rate depends on the number of years you take to pay back the final amount. 

Suppose you are someone who likes more cash liquidity. In that case, a high-interest rate might not be an issue for you in the long run, but if you do not want to face the dilemma of paying a lot of money as interest, then you should look for better options and companies which offer you a standard rate. The goal should always be to pay the loan back as soon as possible. 

Wet or Dry Lease. Which is more preferable?

When it comes to a standard dry lease, the customer only gets the aircraft. In this type of aircraft leasing contract, recruiting the pilot, crew, and support staff along with all of the administrative and employment burdens that come with it are solely your concern. Not only this, but you will also have to bear the expenses of fuel and insurance.

On the other hand, wet leases are quite different from dry leases as wet leases include at least a crew member, some even including a full crew and fuel. This may sound like you are being dealt a better hand but it comes with a lot of instructions. Wet leases also restrict you from having total control over how to deploy the craft and its personnel. 

Wet leases are quite expensive as well and can take a toll on your pocket, irrespective of whether or not you are using the craft frequently. No one in their right mind would like to effectively pay for a crew and craft only to sit around, having nothing to do with it.

Conclusion

If you can get yourself a company that fits all the boxes without making you sweat even once, then you have found your match. The leasing companies might be hard to find, but you must always take the steps as prescribed for a significant investment like an aircraft. You can also depend on genuine customer reviews to get the best opinion from someone who has been a part of the process.