Is buying always better? When leasing is a better option

Leasing vs. Buying – Have you been considering buying an aircraft recently? Are you unsure about taking on that type of financial commitment? Consider: buying isn’t your only option. Pilots are opting to dry lease their aircraft instead from owners looking to expand their business use of the plane.

When you lease an aircraft you are receiving a transfer of possession of the aircraft without receiving title. The lessor retains the title of the aircraft and therefore bares the burden of potential devaluation and the ongoing costs of ownership. The lessee remains liable for any negligent operation of the plane or damages to it unless the lease agreement provides otherwise.

It’s very important to check with your attorney and insurance provider on liability issues before you sign a lease agreement to make sure all of your bases are covered. If you are an owner-lessor, you can require your lessee to purchase trip insurance for his flight, or, if he’s a regular customer, add him as an additional insured to your policy.

A minefield to be aware of is the difference between “wet” and “dry” leases, and whether the owner can receive compensation. In broad terms Part 91 of the federal aviation regulations distinguishes a “wet lease” as including crew. So, if you offer to fly your customer from the left seat for any type of compensation you are engaged in commercial transportation for which you require certification under Part 135. The FAA’s view of “compensation” is very broad, and can include a range of benefits, some very noble, other than money. A third party “dry lease”, in contrast, is best suited to the pilot/lessee in planes that require no additional crew.

Issues related to wet and dry leases, as well as what constitutes “compensation” for a flight are critical. Getting it wrong can cost you your license. Contact us for guidance on these distinctions before leasing, either as an owner or a customer.