Aircraft Finance in Australia: Your Guide to Buying or Leasing an Aircraft

Purchasing or leasing an aircraft is a significant decision, whether you’re an individual, a business, or an aviation operator. In Australia, there are several ways to finance an aircraft, each with its own benefits and considerations. The right approach depends on your financial situation, long-term plans, and the type of aircraft you need.

This guide explains the main options for aircraft finance in Australia, outlines what to consider before making a decision, and provides practical steps to help you secure funding with confidence.

There are several common ways to finance an aircraft in Australia. Each method suits different needs and circumstances:

Operating Lease

An operating lease allows you to use an aircraft for a set period without taking ownership. The lessor (owner) retains ownership, while you (the lessee) pay regular instalments for the right to use the aircraft. At the end of the lease, you typically return the aircraft, though some agreements may offer a purchase option.

Key features:

• Lower upfront costs compared to buying
• Flexibility to upgrade or change aircraft at the end of the lease
• Maintenance responsibilities may vary depending on the lease terms

Operating leases are popular with commercial operators and businesses that want flexibility or expect to upgrade their fleet regularly.

Finance Lease

A finance lease is similar to an operating lease, but with a key difference: you generally take ownership of the aircraft at the end of the lease term, often for a nominal fee. Throughout the lease, you make regular payments and are usually responsible for maintenance and insurance.

Key features:

• Pathway to ownership without a large upfront payment
• Fixed payments over the lease term
• Maintenance and operating costs are typically your responsibility

Finance leases can suit individuals or businesses planning to keep the aircraft long-term.

Purchase Finance (Loan)

Purchase finance involves taking out a loan to buy the aircraft outright. This can be arranged through banks, specialist lenders, or sometimes directly with manufacturers. You make regular repayments over an agreed term, and you own the aircraft from the outset (subject to the lender’s security interest).

Key features:

• Full ownership from the start
• Potential to benefit from any future increase in the aircraft’s value
• Responsibility for all maintenance, insurance, and operating costs

This option is often chosen by those who want full control over their aircraft and plan to use it for many years.

Hybrid Finance

Hybrid finance combines elements of leasing and purchase finance. For example, you may lease the aircraft with an option to buy at the end of the term, but without an obligation to do so. This can provide flexibility if you’re unsure about long-term ownership.

Key features:

• Flexibility to decide on ownership at the end of the term
• May offer lower upfront costs than outright purchase
• Terms and conditions vary depending on the agreement

Hybrid finance is sometimes used by operators who want to keep their options open as their business needs evolve.

Selecting the right finance option involves weighing up several important factors:

1. Duration of Use

Consider how long you intend to use the aircraft. Leasing can be more suitable for short- to medium-term needs or if you expect to upgrade regularly. Buying may be better if you plan to keep the aircraft for many years.

2. Upfront and Ongoing Costs

Leasing usually requires a lower upfront payment, but the total cost over time may be higher than buying, especially if you lease for many years. Buying requires a larger initial outlay but may be more cost-effective in the long run.

3. Maintenance and Operating Responsibilities

Check who is responsible for maintenance and repairs. In some leases, the lessor covers major maintenance, while in others, the lessee is responsible. If you own the aircraft, all upkeep is your responsibility.

4. Flexibility

Leasing offers flexibility to change or upgrade aircraft at the end of the term. Buying provides less flexibility but gives you full control and the ability to customise the aircraft.

5. Tax and Accounting Implications

The tax treatment of lease payments and loan interest can differ. It’s important to seek advice from a qualified accountant or financial adviser to understand the implications for your situation.

6. Resale Value

If you buy an aircraft, consider its likely resale value. Some aircraft hold their value better than others, which can affect your long-term costs.

The best finance option can depend on the type of aircraft you’re considering:

Commercial Aircraft

Commercial operators often prefer operating or hybrid leases for fleet flexibility and to keep capital free for other business needs. Leasing can also make it easier to upgrade to newer models as technology advances.

Corporate Jets

Businesses may choose between leasing and buying, depending on their long-term plans. Leasing offers flexibility, while buying can be more cost-effective if the aircraft will be used heavily over many years.

General Aviation Aircraft

Private owners and small businesses often use purchase finance or finance leases for smaller planes and helicopters. The choice depends on budget, intended use, and how long the aircraft will be kept.

Securing finance for an aircraft is a structured process. Here’s what to expect:

1. Define Your Needs

Clarify the type of aircraft you need, how it will be used, and your preferred ownership structure. This will help you identify the most suitable finance options.

2. Prepare Financial Documentation

Lenders and lessors will require evidence of your financial position. This may include:

• Recent financial statements
• Tax returns
• Details of assets and liabilities
• Information about your business or personal income

3. Develop a Business Case (if applicable)

If the aircraft will be used for commercial purposes, prepare a business plan outlining how the aircraft will be used, projected income, and how repayments will be managed.

4. Compare Finance Offers

Approach banks, specialist lenders, or leasing companies to request quotes. Compare terms such as interest rates, fees, repayment schedules, and any conditions attached to the finance.

5. Review and Negotiate Terms

Carefully review the terms of any finance agreement. Don’t hesitate to negotiate for more favourable conditions, such as lower interest rates or flexible repayment options.

6. Seek Professional Advice

Consider consulting a financial adviser or an insurance broker familiar with aviation finance. They can help you understand the fine print and ensure your interests are protected. For insurance advice, you may wish to speak with a personal insurance broker.

7. Finalise the Agreement

Once you’re satisfied with the terms, finalise the paperwork and arrange for settlement. Ensure you understand your obligations under the agreement before taking delivery of the aircraft.

Here’s a summary of the main advantages and disadvantages of leasing and buying an aircraft:

Leasing

Pros:

• Lower upfront costs
• Flexibility to upgrade or change aircraft
• Potentially lower maintenance responsibilities (depending on lease terms)

Cons:

• No ownership at the end of the lease (unless a purchase option is exercised)
• Total cost may be higher over a long period
• Restrictions on customisation

Buying

Pros:

• Full ownership and control
• Ability to customise the aircraft
• Potential to benefit from resale value

Cons:

• Higher upfront costs
• Full responsibility for maintenance and repairs
• Less flexibility to change aircraft

Once you’ve secured finance, it’s important to manage your obligations carefully:

• Stay on top of repayments: Missing payments can result in penalties or even repossession.
• Maintain the aircraft: Regular maintenance helps preserve the aircraft’s value and ensures safety.
• Review your finance regularly: If your circumstances change, consider refinancing or renegotiating terms.
• Seek professional support: If you have questions about your finance or insurance, consult a qualified adviser or broker.

What documents do I need to apply for aircraft finance?

You’ll generally need financial statements, tax returns, and details about your income, assets, and liabilities. If the aircraft is for business use, a business plan may also be required.

Can I finance a used aircraft in Australia?

Yes, both new and used aircraft can be financed. Lenders may consider the age, condition, and maintenance history of the aircraft when assessing your application.

Is leasing or buying better for a private owner?

It depends on your needs. Leasing offers flexibility and lower upfront costs, while buying provides full ownership and control. Consider how long you plan to keep the aircraft and your budget.

Who is responsible for insurance during a lease?

Typically, the lessee is responsible for arranging insurance during the lease term, but this can vary. It’s important to clarify responsibilities in your lease agreement.