Leasing vs Buying an Airplane: Dry Lease, Leaseback or Own

This guide is for a pilot choosing among three ways to get regular access to a piston single: buy it, dry-lease it from an owner, or buy it and lease it back to a flight school. It runs a five-year cost comparison with every assumption labeled, then covers the leaseback trade-offs, taxes and who each option fits.

What is the difference between buying, a dry lease and a leaseback?

A lease that ends with you buying the airplane at a set price is a different structure, a lease-purchase. It is covered in aircraft lease to own.

What does each option cost over five years?

The assumptions below are for illustration only. Replace them with real quotes. Payments are computed. The lease payment is what a lessor would need to earn an assumed 10% return while expecting the airplane back worth $140,000.

The leaseback insurance figure sits inside BWI's 2026 range of $4,000–$8,000+ a year for a Cessna 172 in flight-school or rental use. The private figure sits inside BWI's $1,200–$2,500 range for a privately owned 172 flown by a pilot with 250+ hours. Who pays the insurance varies by leaseback contract. Sales tax is excluded, because it depends on your state and, for leases, may apply to each payment. See aircraft sales tax by state.

Why buying wins here: of the $63,988 in loan payments, $48,083 is interest and the rest is principal you get back at sale. The lessor, by contrast, prices in its own 10% return and keeps the residual value. The dry lease's advantage is cash: about $6,379 to start instead of $25,500, and no exposure if resale values fall. Resale is the swing factor for buying. Each $10,000 the airplane sells below our assumption adds $9,500 to the cost of buying. As of mid-2026, used piston-single asking prices were roughly flat year over year, but that can change.

When does a dry lease make sense?

• Short or uncertain horizon: a one- to three-year posting, a trial of a type before buying, or a mission that may change.
• Limited cash: you can carry a payment but don't have a 15% down payment plus reserves.
• You don't want resale risk and will pay the lessor to carry it.

Dry leases of piston singles are usually private arrangements with an owner or small operator. Read these terms closely:

• Exclusive or non-exclusive: whether anyone else can fly it.
• Operational control: the lease should state that you, the lessee, have operational control of your flights and operate under Part 91.
• Insurance: the lessee's liability coverage, hull coverage with the owner (and any lender) protected, and who pays the deductible.
• Maintenance: who arranges it, who pays, and how hourly reserves are held and refunded.
• Hour caps and overage charges, and return conditions: current annual, no open squawks, cosmetic standards.
• Early termination: what you owe if you walk away.

A legal caution: an owner who leases you an airplane and supplies a pilot is offering a wet lease. That is a commercial operation that generally requires an operating certificate. If the "lease" comes with the owner's pilot, walk away.

What are the pros and cons of a flight-school leaseback?

In a leaseback, you buy the airplane and lease it to a flight school or FBO that rents it to students and pilots. The school pays you per rental hour or a share of rental revenue, and you usually keep the right to fly it yourself.

Pros

• Rental income offsets fixed costs, and in our example the engine reserve is funded by other people's flying.
• The school may handle scheduling, cleaning and day-to-day squawks.
• Business use can open depreciation deductions (see the tax section).

Cons

• Wear: in our example the airplane flies 2,000 hours in five years, versus 500 if you flew it alone. That can take a mid-time engine to overhaul during the leaseback. Student landings are hard on gear, brakes and interiors.
• Inspections: an aircraft used to give flight instruction for hire needs a 100-hour inspection (14 CFR 91.409(b)), on top of the annual.
• Insurance: rental and training use costs several times a private policy.
• Availability: your airplane is on someone else's schedule, and good-weather weekends are the school's busiest time.
• Counterparty risk: if the school struggles, payments can stop while your airplane is still on its ramp.
• Resale: high airframe time and training history lower the value, which is $15,000 in our example.

Break-even: under these assumptions, the school would have to pay you about $92.50 per rental hour for the leaseback to cost the same as simply buying and flying. At $80 it cost $18,750 more over five years, before taxes. Get the school's actual rental data, not projections, and run your own version.

Contract terms to negotiate:

• The rate or revenue share, any minimum monthly guarantee, and how hours are reported (Hobbs or tach, monthly statements)
• Who pays fuel, oil, 100-hour inspections, and damage by students or renters
• Who chooses the mechanic, who approves repairs above a set amount, and access to logbooks
• Insurance: the named insureds, hull value, deductibles, and the lender as loss payee if financed
• Your scheduling priority and how you're charged when you fly it
• Termination notice, return condition, and what happens if the school closes

Part 91 vs Part 135: rental and flight instruction are generally Part 91 operations. If the operator wants to use your airplane for charter or other carriage of passengers for hire, it must be properly added to that operator's Part 135 certificate and maintained under its program. Never let a leaseback slide into informal charter. For how lenders view leasebacks and training-use aircraft, see flight school aircraft financing.

How do taxes change leasing vs buying?

This is a summary of the rules, not tax advice. Confirm your situation with a CPA before you commit.

• Bonus depreciation is 100% and permanent for eligible property acquired after January 19, 2025, under the One Big Beautiful Bill Act. See the IRS guidance in Notice 2026-11. It can apply to used aircraft if you are the first to use it. There is no phase-down.
• Aircraft are listed property. Bonus depreciation and Section 179 generally require more than 50% qualified business use. Leasing to a 5% owner or related person doesn't count (IRC §280F). Below 50%, depreciation drops to the slower ADS method.
• Depreciation is recaptured. When you sell, gain up to the depreciation you took is taxed as ordinary income.
• Leaseback losses are often passive. Because the school does the work, a leaseback's tax loss may be usable only against passive income. Whether that applies depends on how the activity is classified and your participation.
• Lease payments for an aircraft used in business are generally deductible in proportion to business use. The lessor, not you, depreciates the airplane.

Leaseback illustration: with 300 rental hours and 100 personal hours a year, business use is 75%. A first-year bonus deduction on the business share would be $112,500. At an illustrative 32% marginal rate, that defers about $36,000 of tax, if you can use the loss. On a sale at $130,000, about $92,625 would be recaptured as ordinary income, roughly $29,640 of tax at the same rate. The benefit is mostly timing. For the full rules, see aircraft depreciation and taxes, business aircraft tax advantages and tax strategies for piston owners.

Who should buy, lease or lease back?

How this guide differs from related guides

This page compares owning, a dry lease and a leaseback. For lease-purchase contracts with a buyout at the end, see aircraft lease to own vs a loan. For other non-bank routes, see alternative aircraft financing. For paying cash vs financing a purchase, see aircraft loan vs cash purchase. For sharing ownership instead, see aircraft partnership vs sole ownership. To model a purchase payment, use the aircraft loan calculator.

Frequently asked questions