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Aircraft purchase: Finance, Lease or pay Cash?


Interest rates are low, but if you have the cash, does it make more sense to invest it in an aircraft purchase?

Cash vs. loan vs. lease

If you take a closer look at the current state of aircraft financing, you’ll see that the market is flush with cash. Industry experts think that in 2013, cash comprised about 65% of business jet purchases, 23% was debt financed, and 12% was comprised of leases. On one hand, allotting cash to an aircraft purchase can be a sound, conservative investment. On the other hand, interest rates on private jet loans are still relatively low, ranging from around 2-3% for floating (LIBOR-indexed) rate to just under 7% for fixed-rate loans.

But to determine whether or not it’s worthwhile to take advantage of these low rates, one must consider the lenders’ mood in the current economic climate. Lenders today are cautious and typically require down payments of 10-15% on a loan. Thus, you’ll likely need to have some cash available, or have a guarantor who will put up the down payment. In addition, some lenders won’t finance older aircraft, so the make and model you’re shopping for might affect financing. Plus, closing on a loan takes time. Tasks such as title searches and documentation require a lot of effort. If you have an immediate need for a plane, a cash purchase can be much quicker. If you’re hesitant to use cash, another option still is to lease a plane. However, this comes with its own set of hurdles: Many lenders are hesitant to or simply won’t do leases — or they will impose aircraft age restrictions.

The right choice

So what is the answer to the aircraft purchase quandary? Unfortunately the answer isn’t clear: Whether or not a cash purchase or financing is the best fit depends on your situation. If you have the cash, now is a great time to invest it in an aircraft purchase. And if you still want to take advantage of the low interest rates, you have the option to make a large cash down payment and finance the rest of the purchase.

However, if you don’t have the cash, you must decide whether to go the route of the loan or the lease. Your needs will determine whether a loan or lease is right, taking into consideration tax depreciation, amortization, your preferred aircraft’s age, and what terms your lender is offering. Regardless of which direction you go, if you are facing a financing decision, keep in mind that pre-approval from a lender can shorten the closing process. When in doubt, you can’t go wrong by turning to a trusted industry expert to guide you through the process. For more quick answers, check out our online Financing Questions resource. And when you’re ready to buy, give us a call. The experts at Amaka Gloval AIrways can help you ask the right questions to reach the ideal financing terms and ensure you get the best aircraft for your money — cash or financed. Contact us if you need assistance in purchasing or selling a private jet.

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