Buy vs. Lease

[FL350]

I don't have my MBA and I am not an accountant so maybe this is a stupid question but....

Why would a corporation lease an airplane rather than buy it? If they lease it, the company is throwing away the money. As far as I know there are no tax benefits and you aren't building equity in the airplane.

If you buy the plane, yes you have a lot of capital tied up but you can depreciate the airplane over a number of years on the companies books. When you turn around and sell the plane, it will have come close to paying for itself.

Like I said, I am not an accountant nor do I have my MBA. I am just a well paid taxi driver. If anyone can enlighten me I would appreciate it.

FL350

 

[Andy Neill]

Do you own your car or did you buy it?

I would lease IF
- Actual depreciation was steep
- Investment captial was tight
- Venture horizon was close

Otherwise, I would buy.

 

[slickmagneto]

It's a ploy available to hide the company jet from the public and the stockholders when the profits are not being made.

 

[jetdriven]

if you cant stay in the aircraft for a few years then leasing is a way to go. Use the 20 million or whatever to grow the business instead of buying the aircraft. an added benefit is fixed costs, no 150,000 whoop-de-doos to fret about.

business aircraft have recently depreciated a staggering amount. the lessor has to bear the brunt of the sometimes millions of dollars in unexpected depreciation.