Commercial Financial products commonly used for financing aircraft include:
A lease by definition is "Renting an aircraft". During the lease the Ownership of the Aircraft remains with the Finance company. 100% of the purchase is financed. A residual amount (end amount) is chosen from consulting tax guidelines and advice from your accountant. You then make lease payments over the term of the lease in equal monthly amounts. At the conclusion of the lease the residual amount remains. Options are available for a 13 months in advance rental and annual rent payments for clients with seasonal income.
Advantages: Predictable payments, Set term. Disadvantages: No ownership of the goods, High exit fees for leaving the facility early (sometimes no ability to payout early), Residual amount at the conclusion of the agreement. Must finance 100% of the asset, no option of a deposit.
As the name suggests ownership under a hire purchase agreement only transfers to the purchaser (hirer) after the last repayment has been made. The facility allows for an upfront deposit or can be 100% of the purchase price. Hire Purchase agreements run for a set term have a fixed interest rate and can be either a straight payment where there is no end payment, or with an end payment commonly known as a balloon. A balloon is selected to reduce monthly payment commitments and at the conclusion of the agreement need to be refinanced, the aircraft sold or paid out in full from the purchasers own resources.
Advantages: Fixed repayment, including annual repayments (for entities with seasonal income) Choice of no end debt or balloon payment, Deposits allowed. Disadvantages: Ownership remains with the finance company until the last repayment is made. Exit fees apply when loan is not taken for the agreed term.
Purchases own the title of the aircraft on day 1 and the finance company takes a "Mortgage" over the Aircraft. The product generally offers a fixed interest rate, regular repayments and the option of a balloon at the end of the contract. 100% of the aircraft can be financed or a deposit to reduce the loan amount can be made. Seasonal or irregular payments can be written into the contract if required to suit cash flow.
Advantages: Fixed repayment, including annual repayments (for entities with seasonal income) Choice of no end debt or balloon payment, Deposits allowed. Disadvantages: Exit fees apply when loan is not taken for the agreed term.
These are the three most common products used for Aircraft finance in Australia. This is a general guide only and upon contacting our experienced Aircraft financiers we will be able to guide you to the most suitable product for your situation. Only an experienced financier like Nationwest understands aircraft and the unique requirements of our industry.