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Private Aviation Finance - Why Cash Isn't Always King When It Comes to Acquiring a Private Jet

Private Aviation Finance - Why Cash Isn't Always King When It Comes to Acquiring a Private Jet

NAFA member Gary Crichlow, Aviation Finance Advisor with Arc & Co., in collaboration with Iain Houseman with Elit'Avia, discusses why cash isn't always king when acquiring a private jet.

ARC & CO. IN CONVERSATION WITH ELIT'AVIA

The world of financing can seem a complex arena to navigate to get the best deal and, as such, the majority of private aircraft transactions are in cash. There are a number of reasons for this, including that aviation finance is often seen as too much of a hassle, too expensive, restrictive, invasive, complicated, not transparent or all of the above. It’s true that putting a finance deal together is a complex undertaking. But there is a key benefit that makes finance worth considering:

YOUR CASH ISN’T TIED UP IN A DEPRECIATING ASSET

Having such a large capital investment in an asset that depreciates in value over time makes financing an attractive option. Linking financing to the different tax regulations and exemptions makes it an even more approachable option when maximising the value of retaining capital for investment in other areas.

Of course, there are always exceptions to this depreciating-asset rule: sometimes the market dynamics can be such that specific aircraft types and models become particularly sought after and appreciate in value as a result (e.g. the Gulfstream G550). But these are exceptions, with limited durability of demand and the dynamics are volatile: value bumps are often unpredictable, sudden and short-lived.

Speculative buyers looking to buy low and sell high need to know what they’re doing, have a high risk tolerance and be willing to go through the complexities of the buying and selling process at a moment’s notice in order to capitalise. Whether you’re buying the aircraft for use or speculation (or both), accessing finance preserves your cash – allowing you to invest it elsewhere.

Click here to read the full article.

This article was originally written and published by Arc & Co., in collaboration with Elit'Avia, on May 20, 2019.