When to Buy, When to Lease Aircraft?

[Tuckernut]

I am trying to figure out at what point does it make more sense to buy or lease.  In the Cargo Challenge I can lease an acft for $225,000 a month but to purchase it is $82,000,000.  For a challenge that will last only a few years it seems logical to lease.  It would interest me to see when other players decide to buy an aircraft.

[Zombie Slayer]

When you can safely do do without causing financial distress. A leased plane is paid for with 7 years if lease payments.

[gazzz0x2z]

I'd add the usual advice is "buy new, lease old". Partly because of what ZombieSlayer said, and partly because the older a plane, the less leasing costs are important in terms of total costs(they go down while maintenance goes up, basically). There are exceptions to the rule(i.e. early in the game, UM is empty, you need the birds, and you don't have the cash to purchase - my situation early in current GW3).

[Talentz]

When I have more money too spend then I know what to do with.... I guess.




Talentz


Edit: What that really means is when your (or my) weekly profits reach the amount it takes to buy the used aircraft you are normally leasing to expand. Ie: If I am leasing 20m dollar aircraft(s) and my profits start too exceed 20m+, then I start buying. I know that I can still expand, yet start reducing my overall costs for the future.

It depends on a few other factors as well, but generally that's the idea.

[Tuckernut]

That is some great advice.  It has taken me some time to learn to tweak pricing but I like the idea of buying with a week of profits.

[jordo1489]

I have no idea how people can make money with leased aircraft that are new. A new 330/340 will cost you about $3mill a month, that will just eat up any potential profits

[gazzz0x2z]

I have no idea how people can make money with leased aircraft that are new. A new 330/340 will cost you about $3mill a month, that will just eat up any potential profits

depends on the aircraft(the cheaper the better, A148s or A140s are very cheap to lease), depends on the era(the earlier the better), depends on the timing in the game(the earlier the better). But yeah, in a mature game, leasing a brand new A340 is rather foolish IMHO. Or even a 767.

[wilian.souza2]

I have no idea how people can make money with leased aircraft that are new. A new 330/340 will cost you about $3mill a month, that will just eat up any potential profits

You can lease new aircraft to accelerate a fleet transition, for example, using them while your owned aircraft aren't delivered yet. And in some cases, depending on the routes they operate, they can still be profitable. What really counts on leased aircraft is not the monthly payment, but the total amount of lease you'll pay during the lease period.

[groundbum2]

the other consideration on lease vs buy is (a) cash on hand and (b) cash flow.

It may make sense to buy based on your intended use of the aircraft (like for 20 years+) etc, but if buying it leaves you short of cash then a lease may be better. Most businesses fail due to lack of cash, not anything else. So if you buy, and get short of cash, then get some D checks and a 9/11 event and a fuel spike, for example, you may run out of cash!

The big players are looking at cash flow a decade ahead. If you need to replace 100 747s in 10 years time, you had better have done the sums about how much cash you'll have then etc.

Lease is really low risk for cash flow

Simon

[Tha_Ape]

the other consideration on lease vs buy is (a) cash on hand and (b) cash flow.

It may make sense to buy based on your intended use of the aircraft (like for 20 years+) etc, but if buying it leaves you short of cash then a lease may be better. Most businesses fail due to lack of cash, not anything else. So if you buy, and get short of cash, then get some D checks and a 9/11 event and a fuel spike, for example, you may run out of cash!

The big players are looking at cash flow a decade ahead. If you need to replace 100 747s in 10 years time, you had better have done the sums about how much cash you'll have then etc.

Lease is really low risk for cash flow

Simon

Death spiral almost hit me in the 80s when I bought 200 767, had less than 50 m in the bank at the end, despite having a very fat bank account before the renewal, and 300 733 I used to make extra money (within the alliance, though, so not that expensive).

So yes, that's a very good point. However, if you do so, keep thinking wide: your cashflow will be reduced. Thus leasing massively could prevent you from buying even on the long run. So once again, plan carefully.

[Zobelle]

You can lease new aircraft to accelerate a fleet transition, for example, using them while your owned aircraft aren't delivered yet. And in some cases, depending on the routes they operate, they can still be profitable. What really counts on leased aircraft is not the monthly payment, but the total amount of lease you'll pay during the lease period.

Bingo. This is where I'm at right now trying to dig myself out of a billion dollar a year sinkhole.