Equipment: Lease vs Buy?

Aviation is a landscape of specialized equipment: GPU's, airstairs, lavatory carts, tugs, and fuel trucks to name a few.  Any company that supports the needs of aircraft operators must have some (or all) of this equipment to effectively meet their customers’ requirements. For maintenance providers, the list grows comprehensively to include equipment to service and test various aircraft systems.

For small and mid-size companies, the cost of acquisition can be prohibitive and access to credit limited. While there is a market for used equipment, it may be less reliable and require more frequent maintenance to remain in service. This will undoubtedly lead to additional expense of both time and money.

Equipment leasing offers access to new or newer equipment without tying up capital. Newer equipment is more reliable, often safer, and will showcase your company's commitment to quality. Leasing new equipment will typically include warranty and service support that would not be available with older, used equipment. Finally, leasing equipment is scalable. If the business changes such that a specific piece of equipment is no longer needed, the lease does not have to be renewed.  Some leases allow for an early exit with some amount of notice.

The most common objection to equipment leasing is not having control of the "equity" or value of the asset. Depreciation is not an option nor is the ability to sell the equipment. Purchased equipment becomes a business asset which adds to the net worth of the company.  When you own the equipment outright there are no restrictions on modification or utilization.

We advise our clients to consider leasing vs buying over a 3-5 year period. There are variables to be weighed such as cash flow, access to capital and/or credit, expected utilization of the equipment, operating environment, and the residual value of the equipment over time.

Since 2014 Stratus Business Development has been helping our aviation clients achieve greater success. We support and advise a variety of aviation organizations with consulting and project management services.