|
Undecided whether to Lease or to Purchase your Robinson Helicopter?
A lease usually is the smartest and most cost-effective solution to "owning" an aircraft.
For most individuals and companies, leasing provides a host of benefits and frees them from
a number of risks that make "owning" the aircraft a truly carefree experience.
There is a reason why 80% of businesses prefer leasing over purchasing and financing: It is the
use of the helicopter and not its ownership that produces the benefits of the helicopter.
For a more detailed comparison, consider ...
|
|
|
Purchasing & Financing:
If you purchase a factory-new Robinson helicopter a non-refundable deposit in the amount
of $10,000 for an R22 or $25,000 for an R44 is due at the time you place your order. When you receive the helicopter your
lender requires a down payment of typically at least 20% and sales tax may add another significant amount to
your upfront cost. Your total cost before you even see the helicopter will be at least $50,000 and may even exceed $150,000.
Leasing:
If you lease a helicopter, your only up-front cost will be a small security deposit. This security deposit is fully
refundable while in the purchasing scenario sales tax and a significant portion of the down payment (due to depreciation)
would not flow back into your pocket. Thus, leasing will not only result in significantly lower up-front cost but also in
obvious overall savings.
|
|
|
Purchasing & Financing:
When you finance your helicopter all your equity portions of your loan payments including your
initial down payment are tied up in that helicopter and you are unable to benefit from this significant equity.
Leasing:
If you lease the helicopter you don't have any equity payments. You only pay for the actual usage of the helicopter.
|
|
|
Purchasing & Financing:
By borrowing funds from a lender for an expensive item such as a helicopter, you are significantly reducing your line
of credit and the ability to obtain any loans for other needs. Financing
may even require additional collateral to secure the loan, even further reducing your remaining line of credit.
Leasing:
Leasing will provide you with the same usage of the helicopter but without any impact to your credit line. You use the
helicopter as needed and pay for your usage as you go.
|
|
|
Purchasing & Financing:
A helicopter purchase results in a significant liability on your balance sheet. For many individuals and smaller
companies, this may prevent you from obtaining loans and generally lowers your financial
performance indicators.
Leasing:
Operating leases are generally structured in accordance with the provisions set forth in FASB 13, i.e the lease
is not required to appear on your balance sheet for financial statement reporting purposes. Your lease payments
are simply treated as fully tax-deductible rental/lease expenses on your income statement. Taking a lease "off balance sheet" under
accounting regulations can have both direct and indirect financial benefits. Direct benefits include lower payments
than if the entire purchase price was financed with a loan. Indirect benefits stem from better financial "ratios"
on the Balance Sheet and as a result, better financial performance indicators.
|
|
|
Purchasing & Financing:
If you own the helicopter you can depreciate this asset and deduct your loan interest expenses. However, your equity
portions of your loan payments will not be tax deductible.
Leasing:
If you lease the helicopter, the entire lease payment for each and every lease payment is typically treated as an expense
and as such fully tax deductible.
|
|
|
Purchasing & Financing:
If you purchase and own the helicopter the actual expenses for your flight hours can only be determined after you will have
sold the helicopter. Based on the market and how quickly you will have to sell the helicopter,
the sales price can vary significantly making every single flight hour in hindsight possibly $50-$100 more expensive than
budgeted.
Leasing:
If you lease a helicopter all your “ownership” expenses (i.e. your lease payments) are fully known upfront. The lessor takes
the entire market value risk so that if the market drops, the lessor (and not the lessee) looses.
|
|
|
Purchasing & Financing:
Robinson helicopters require complete overhauls every 2,200 hours of flight time. Such overhauls will cost you about $100,000
for an R22 and about $150,000 for an R44. Additionally, your helicopter will be out of service for about six month while
being overhauled. Many expenses such as loan payments will continue while not having the helicopter available for flight.
Leasing:
If you lease a helicopter you don't have to worry about overhauls. As the leased helicopter approaches the time for an
overhaul the lease automatically terminates and you simply return the helicopter to the lessor without any charges or
worries to you.
|
|
|
Purchasing & Financing:
To make ownership cost effective, you should operate your helicopter for many years. This is a significant long-term commitment.
Leasing:
If you lease the helicopter your commitment can be of a much shorter duration. Additionally, at the end of your lease you have
many flexible options:
- If you no longer need the helicopter simply return it to the lessor without having to find a buyer.
- Trade-in the helicopter for another helicopter with options that better meet your changing needs.
- Renew your lease if the helicopter is serving you well.
- Purchase the helicopter if you determine that for some reason ownership becomes more beneficial for you.
|
