Finance 2 APRIL20.qxp_Finance 17/03/2020 15:22 Page 1
FINANCE
Ownership vs Lease: What are the Pros and Cons? To lease or to buy? That is a very, very big question.
Rohit Jaggi speaks to the industry’s experts to find the pros and cons to each option and find out which is best suited to whom?
hether you ultimately choose to lease or buy, both will achieve the same short-term goal of placing you in your next aircraft. But they’re hugely different – including in a couple of ways that might be surprising. In a world where car ‘ownership’ is routinely by personal contract plans that have transformed access to expensive vehicles, ownership might seem a touch old-fashioned. But taking that route still has some compelling reasons. Choosing between buying and leasing largely comes down to liquidity and opportunity cost. But it can be even more complicated than it appears. As Gary Crichlow, director of aviation finance at London-based finance brokerage and advisory firm Arc & Co, points out, those two options can be subdivided to make four main ways to own your next business aircraft.
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8 Vol 24 Issue 5 2020 AVBUYER MAGAZINE
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The first is outright ownership (cash). Second is to own via debt financing, with the airplane as security for the mortgage. Third is leasing via a finance lease or hire purchase, which, like debt financing will probably involve an initial deposit, monthly payments and possibly a final lump sum ‘balloon’ payment. Unlike debt financing, the lender will keep legal ownership of the airplane until the loan is paid off. Fourth is an operating lease, which is more like renting the aircraft. The lessor owns it throughout. A deposit is usually a security deposit that is repaid, all being well, when the airplane is handed back at the end of the term.
As Crichlow says, “All of these options are complex, but option one is generally the simplest www.AVBUYER.com
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