Leasing new plane. When do i OWN it?

[itts]

Hi,

When i try to lease a 40mln plane for 3 years, monthly fee is 540k
36x months x 540k = 20mln, so it is 20mln short of plane price.
What happens next? Do i have to pay 20mln to OWN that plane?

In real life after your lease is over, you either return "item" you leased, or pay usually small fee and own that item.

On 7 years lease it's 560k x 84month = 47mln, thats more or less price of the plane, but what happens and how much has to be paid to OWN that plane?

[Sami]

The lease deal is a operational lease, not a financial lease which would be what you described.

[itts]

Thanks for quick reply.

So only way to own a plane is to buy it for cash?

[Sami]

yes, or a loan.. But that is basically 'cash' too..

[EYguy]

Yeah, anyway, would it be possible to make the "buy" option possible in the future???

[Riger]

Are you talking about a Rent to Buy option which gives you credit (discount) for money already paid in lease fees?


Regards

Richard

[EYguy]

YEs... Even if in the common business language the "leasing agreement" gives to the lessee the option to buy the a/c for a small amount of money at the end of the contract. We're not talking about operative leasing, because all of the lessor here as financial institution which then lease their a/c to customer like me.
If you start a leasing agreement with an entity like IFLC Corp, which is the biggest a/c lessor in the world, you can decide the amount of the first fee (called:"Initial fee") which covers up to 30% of the a/c price. Then you have the monthly fees as we have here, comprising the refund of capital and the interests paid on the loan. The, at the end of the leasing contract, you can decide if you want to BUY the a/c or give it back to the lessor. I do not know if it's called "rent to buy", but the "rent to buy" is usually called the "operative leasing".

[Sami]

An example is here (just a quick Googling):  http://www.icbc.com.cn/icbc/corporate%20banking/financinglease/aircraftlease/

There are 3 different types of lease models mentioned there, and in reality there are even more variations than those. We are modeling only one of those at the moment, and it is the operational lease like I already mentioned.

"Rent to buy" is the financial lease.