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Author Topic: LEASE OR BUY  (Read 719 times)

olympic17111992

  • Former member
LEASE OR BUY
« on: May 10, 2009, 12:59:19 PM »
If you want to buy an aircraft that you were leasing, it will cost less money than buying a new one?
Also, which is more money worth, to lease or to buy aircraft?

Kontio

  • Former member
Re: LEASE OR BUY
« Reply #1 on: May 10, 2009, 01:17:37 PM »
When you buy an aircraft you are leasing, you pay the lessor a proportion (50%?) of the remaining lease sum and the current value of the aircraft. If you are asking if and when you should buy the aircraft you are currently leasing then it's a very complicated issue and you will find many different views and opinions.

 I'm not sure what you mean by the last sentence, but if you are talking about airline value (in the statistics), it consists of the value of owned aircraft + your cash - outstanding loans. Leased aircraft have no contribution to that calculation.

olympic17111992

  • Former member
Re: LEASE OR BUY
« Reply #2 on: May 10, 2009, 01:54:06 PM »
With the last sentence i am asking what gives you more money!!
Is it better to pay lets say 700.000$ per month than 40.000.000$ to buy the aircraft??

Jps

  • Former member
Re: LEASE OR BUY
« Reply #3 on: May 10, 2009, 02:05:16 PM »
With the last sentence i am asking what gives you more money!!
Is it better to pay lets say 700.000$ per month than 40.000.000$ to buy the aircraft??
That depends on several factors. These being for example
1.) How long you will use the aircraft (the longer the time, the more you pay leases. Though, if you bought, the more the value of the aircraft will sink).
2.) Will it be easy to sell the aircraft after you don't need it (it's not very likely you'll pay leases more than what the aircraft had cost in the first place. Though, in your example that'd be 5 years, after that it's cheaper to buy. However, if you sell the plane, you'll get some of your money back, thus it can change buying to be less expensive. So if you buy it for $40 million, and after 3 years sell it for $15 mill, you have used $25 millions to use the aircraft for 3 years. In the same time the lease costs would be $25,2 millions. So already for 3 years buying would be better, unless the value of the plane sinks more or you can't sell it).

Offline Sigma

  • Members
  • Posts: 1920
Re: LEASE OR BUY
« Reply #4 on: May 10, 2009, 03:52:31 PM »
Depending on the discount you get when you buy (how many at once), and the lease price you're paying, it takes roughly 7-9 years for the monthly payments on a lease to equal those of a purchase.

So if you only plan on keeping the plane a short while, there's not a particular reason to buy it.  Of course, even if you don't need it, you can always turn around and lease it yourself -- but if it's not a plane anyone wants you don't get anything.  Or maybe can even sell it yourself, in which case the break-even point seems to be in the 3-4 year range -- i.e. you can sell a plane after 4 years, and the difference between what you bought it for new and what you sold it for used, is less money than it would have cost you to lease it for that same 3-4 years.

There's also cost of money to figure in as well.  If spending all your money on buying 3 planes outright prevents you from leasing 15 planes that could be used to significantly increase your revenues and market penetration the financial security of the purchase may not be worthwhile.  But that's up to you to decide.
« Last Edit: May 10, 2009, 03:54:49 PM by Sigma »

 

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