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#002107
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Extended Lease 3% Discount Increases Monthly Lease Cost
I've leased 747-300s in bulk and when I choose to extend my lease, it gives a discount based on the monthly cost for a single delivered aircraft ($1,844,444) and not the actual monthly cost after negotiations ($1,237,037). This means that the extend lease "discount" actually increases my monthly leasing cost to $1,291,111.
If you still want to fly the plane past the 10 year lease duration it usually is the best option to buy it on the way.
Remember: half of the lease payments paid will be deducted from the sale price as then.
So approximately:
Normal price after 10 years: $166 mio * (0.91)^10 = $64.4 mio
Lease payments paid: 120 * $1.237 mio = $ 148.44 mio, half of that is $74.2 mio
Effectively to pay: $64.4 mio -/- $ 74.2 mio = yes, the plane will be free of charge (usually already after 7-9 years depending on depreciation rates)
Therefore extending a 10 year lease is in the game a bit pointless
While all that makes sense, extending a lease should realistically never result in the monthly leasing cost increasing. That is the issue here.
In this case, extending a 10 year lease is not only pointless, it is a disadvantage. If it were pointless the monthly leasing cost would remain the same even if the lease term is extended. The code should change to reflect this.
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