Aircraft Leasing: Finance, Operating, Dry and Wet Leases.
How each type of aircraft lease works, how they compare with each other and with buying, and which fits a flight school, charter operator or company jet.
Aircraft leasing comes in four main forms. An operating lease rents the aircraft for part of its life and you hand it back; a finance lease is built to end in ownership, usually at a preset or nominal price. Dry and wet describe crew: a dry lease is the aircraft only, a wet lease includes at least one crew member. Most financing leases are dry leases.
Key takeaways
- Operating lease: lower cash up front and the lessor carries residual value risk; you meet return conditions at the end.
- Finance lease: you carry residual value risk and expect to own the aircraft; it behaves much like a loan.
- Dry vs wet is about crew and operational control, not about ownership; a finance lease is usually also a dry lease.
- Leasing beats buying when flexibility and cash matter more than ownership, or when the aircraft is likely to lose value fast.
What are the main types of aircraft lease?
Two questions define any aircraft lease: who ends up owning the aircraft, and who supplies the crew. Operating and finance leases answer the first; dry and wet leases answer the second.
| Lease type | What it means | Owner at the end | Residual value risk | Typical users |
|---|---|---|---|---|
| Operating lease | Use the aircraft for a set term, then return or extend | Lessor | Lessor | Flight schools adding trainers, charter capacity, companies that want flexibility |
| Finance lease | Payments cover most of the cost; purchase at the end, often preset or nominal | You | You | Operators who want to own but finance through a lessor |
| Dry lease | Aircraft only, no crew; lessee holds operational control | Depends on the lease | Depends on the lease | Most financing leases, flight schools, corporate operators |
| Wet lease | Aircraft with at least one crew member; lessor holds operational control | Lessor | Lessor | Air carriers adding short-term capacity (ACMI) |
| Sale-leaseback | Sell an aircraft you own to a lessor and lease it back | Lessor | Lessor | Owners releasing equity while keeping the aircraft |
NBAA describes leasing as an alternative to outright purchase for reasons ranging from practicality to cash flow, and draws the crew line clearly: under a dry lease the owner provides only the aircraft and no crew, and if at least one crew member is provided it becomes a wet lease, which without an exemption requires an FAA commercial operating certificate.
How does an aircraft finance lease work?
An aircraft finance lease, sometimes called a capital lease, is designed to end in ownership. The lessor buys the aircraft, you make payments that recover most or all of its cost plus a financing charge, and you buy it at the end for a preset or nominal price, sometimes one dollar. You maintain and insure the aircraft and carry the risk that it is worth less than expected, so economically it sits close to a loan. It can suit an operator who wants ownership but needs less cash at the start than a lender requires, or who gets better terms from a lessor than from a bank.
Under current U.S. lease accounting, most leases longer than a year appear on the lessee's balance sheet either way; a finance lease shows interest plus amortization, an operating lease a single straight-line expense. The operating lease vs finance lease guide explains the tests and the accounting, and the finance lease structure page covers who it fits.
What does an aircraft finance lease cost?
A finance lease payment is set like a loan payment: the aircraft cost, the lessor's implicit rate, the term and the purchase price due at the end. These numbers are hypothetical and only show the math. On a $1,000,000 aircraft over 60 months at an implicit rate of 7.5%, a one-dollar buyout works out to about $20,038 a month; setting a 20% purchase price ($200,000) at the end lowers the payment to about $17,280 but raises the total paid. Lessors often quote the payment as a lease rate factor, a monthly percentage of the aircraft cost, which how lessors price an aircraft lease explains. The aircraft finance lease guide walks through the example and how to get quotes, and you can model the same payment in the aircraft loan calculator by setting the balloon to the purchase price.
What lease costs do operators miss?
- Return conditions on an operating lease: engine time remaining, inspections, damage repairs and records. See aircraft lease return conditions.
- Maintenance reserves: monthly payments toward engine overhauls and major inspections. See maintenance reserves in aircraft leases.
- Hour limits and excess-use charges, which matter most to flight schools and charter operators.
- Insurance, taxes and fees, which usually sit with the lessee in both operating and finance leases.
How does an aircraft operating lease work?
In an operating lease you pay rent, usually fixed and monthly, to use the aircraft for part of its life and then hand it back. The lessor owns the aircraft and carries the risk of its value at the end. Read the return conditions as closely as the rent: engine time remaining, completed inspections, damage repairs and records standards can create real costs at hand-back, and many leases add monthly maintenance reserves. A purchase option, usually at fair market value, can be negotiated but does not lock in a price.
Jet operating leases. For business jets the same logic applies at a larger scale. AvBuyer notes that operating leases can finance 100% of the asset while shifting residual value risk to the lessor, which is the main attraction for companies that do not want to bet on a jet's resale value. Lessors focus on engine programs, utilization limits and return conditions. See jet financing: loans and leases.
Single-engine aircraft leases. For piston singles such as the Cessna 172, Piper Archer and Diamond DA40, operating leases are common at flight schools that want to add trainers without tying up cash, and lessors price for high utilization. Flight schools also lease aircraft dry from private owners in leaseback arrangements, which AOPA Aviation Finance notes can be harder to finance for the owner. See how to finance a flight school fleet.
What is the difference between a dry lease and a wet lease?
A dry lease provides the aircraft only: the lessee supplies the pilots and holds operational control, so flights can generally run under Part 91. A wet lease provides the aircraft with at least one crew member: the lessor keeps operational control and generally needs an air carrier certificate. FAA Advisory Circular 91-37B covers the truth-in-leasing rules that apply to many leases of large aircraft. The full comparison, including a step-by-step guide to 14 CFR 91.23, is in dry lease vs wet lease vs finance lease.
Is it better to lease or buy an aircraft?
Lease when flexibility, cash on hand or protection from falling values matter more than ownership. Buy, with a loan or finance lease, when the aircraft is core to the operation for years and is likely to hold its value. Over a full term buying is often cheaper when the aircraft holds value, because you keep the resale proceeds; leasing wins when value falls fast, when cash earns more elsewhere or when you may not need the aircraft for the whole term. Tax position, utilization and the return conditions decide close cases.
Work through it with the lease vs finance calculator, then read aircraft lease vs buy: the complete decision guide. To see how a lessor sets the rent, read how lessors price an aircraft lease, and aircraft lease return conditions for what you must hand back. If a loan wins, estimate the payment in the aircraft loan calculator and check aircraft loan rates today.
Can you finance a private jet, and for how long?
Yes. Private jets are financed with secured loans, finance leases, operating leases and sale-leasebacks. Terms are shorter than the jet's life: AOPA Aviation Finance describes standard turbine terms as a 15-year amortization with a 5-year term, leaving a balloon at maturity, with down payments that could be as low as 10% depending on the aircraft. FLYING Finance lists turboprop and jet starting rates with up to 20-year amortization. Business Jet Traveler reported in 2022 that 10-year amortization schedules were common and that advance rates of 75% or 80% of the purchase price were not unusual. Older jets, heavier use and Part 135 charter usually mean shorter terms and more equity.
How do you choose the right aircraft lease?
- Decide whether you want to own the aircraft at the end. Yes points to a finance lease or loan; no points to an operating lease.
- Decide who supplies the crew. If you do, the lease should be written as a dry lease with operational control where it actually sits.
- Estimate realistic annual hours and compare them with any lease hour limits.
- Price the return conditions and maintenance reserves, not only the rent.
- Compare the lease with a loan on the same aircraft and term, and ask a tax advisor how each is treated.
This hub is general information, not tax, legal or accounting advice. When you are ready to compare real lease and loan quotes on one aircraft, you can start a deal file with JetFinex.
Aircraft leasing guides and tools
Frequently asked questions
What is a finance lease on an aircraft?
A lease designed to end in ownership: payments cover most of the aircraft cost plus a financing charge, and you buy it at the end for a preset or nominal price. You carry the residual value risk, so it behaves much like a loan.
What is an aircraft operating lease?
A lease where you use the aircraft for a set term and return it. The lessor owns it and carries the residual value risk; you pay rent and meet return conditions, and often maintenance reserves.
What is the difference between a wet lease and a dry lease?
A dry lease provides the aircraft only, and the lessee supplies crew and holds operational control. A wet lease provides the aircraft with at least one crew member, and the lessor keeps operational control and generally needs an air carrier certificate.
Can you finance a private jet?
Yes. Private jets are financed with secured loans, finance leases, operating leases and sale-leasebacks from banks, specialist lenders and lessors. Lenders look at the jet's age, engine program, value and use, and at the buyer's finances.
How long can you finance a private jet?
AOPA Aviation Finance describes standard turbine terms as a 15-year amortization with a 5-year term, which leaves a balloon. FLYING Finance lists turboprop and jet starting rates with up to 20-year amortization. Older jets and charter use usually get shorter terms.
How much does it cost to lease an aircraft?
It depends on the aircraft value, term, lease type and lessee. Lessors often quote a lease rate factor, a monthly percentage of the aircraft cost; operating leases add return conditions and often maintenance reserves. See how lessors price an aircraft lease.
What are aircraft financing structures?
The main ones are acquisition loans, operating leases, finance leases, sale-leasebacks, refinancing and fleet facilities. They differ in who owns the aircraft, who carries value risk and how much cash is needed up front; see aircraft financing structures compared.
Can I lease a single-engine aircraft such as a Cessna?
Yes. Operating leases and leasebacks of piston singles such as the Cessna 172 and Piper Archer are common at flight schools. Lessors look at utilization, maintenance program and the operator's history.
Is it cheaper to lease or buy an aircraft?
Over a full term, buying is often cheaper when the aircraft holds value, because you keep the resale proceeds. Leasing can cost less when values fall fast or when you will not need the aircraft for the whole term.
Sources
- NBAA, Aircraft leasing
- FAA, Advisory Circular 91-37B, Truth in Leasing
- Cornell Law School LII, 14 CFR 91.23 Truth-in-leasing clause requirement
- AOPA Aviation Finance, Turbine and turboprop financing
- FLYING Finance, Aircraft loan rates
- AvBuyer, How does business aircraft finance work?
- Business Jet Traveler, Financing a business jet in today's volatile market
- AOPA Finance, Difficulties financing an aircraft for leaseback
- The CPA Journal, Practical illustrations of the new leasing standard for lessees
Educational content, not tax, legal or accounting advice. See our editorial standards and disclosures.
