Lease with option to buy

[Jim Burns]

Has anyone leased an aircraft (used, not new) with the option to purchase at
the end of the lease? If so, what percentage of the monthly lease payments
did the owner allow you to apply to the purchase price?

Thanks,
Jim

[Richard Kaplan]

"Jim Burns" > wrote in message
...

> Has anyone leased an aircraft (used, not new) with the option to purchase
at
> the end of the lease? If so, what percentage of the monthly lease
payments
> did the owner allow you to apply to the purchase price?

Related questions are why do you want to lease the airplane and who pays for
maintenance while you lease the airplane?

Leasing of cars as an example generally works because the interest cost is a
fairly small percent of the overall cost and the lease payments are
structured to represent interest plus a monthly payment for depreciation.
Typically leased cars are new and thus are on warranty for maintenance.

In the case of a used airplane, there is no anticipated depreciation and the
cost of capital is the same whether you buy it or lease it. Thus the owner
must recover at a minimum the interest cost on capital and it makes no sense
to apply this toward purchase. If the owner is responsible for maintenance,
then there becomes little advantage to him to lease the airplane to you.
Yet if you are responsible for maintenance you could wind up making major
long-term improvements to the airplane, i.e. you install components which
will last for years.

Thus I do not see how leasing can be a win-win situation. The major capital
cost of owning an airplane is interest rather than depreciation and this
does not change if you lease the airplane. Maintenance is a very sticky
situation to take over when you lease an airplane. So in the end what is in
it for you and what is in it for the owner?

The short answer to your question though would be that the only amount which
would make sense to apply toward purchase price would be any lease amount
which exceeds the interest expense on the airplane value plus fixed expenses
(insurance, hangar, scheduled maintenance).


--------------------
Richard Kaplan, CFII

www.flyimc.com