Currency Considerations

Aircraft transactions are predominantly conducted in US dollars, regardless of where the buyer or seller is located. For international buyers whose income and assets are primarily in other currencies, this creates exposure to exchange rate fluctuations throughout the financing term.

Currency risk affects both the initial purchase (converting local currency to USD for down payment) and ongoing loan payments. A significant depreciation of your home currency against the dollar can substantially increase the effective cost of aircraft ownership.

Several strategies can help manage currency risk. Maintaining a USD-denominated account for aircraft-related expenses provides a buffer against short-term fluctuations. Some buyers accumulate dollars over time before the purchase to average their exchange rate.

For the down payment, timing flexibility can help. If your home currency is weakening, accelerating the conversion when rates are favorable can reduce costs. Conversely, if rates are expected to improve, a short delay might be beneficial.

Forward contracts and currency hedging instruments are available through banks and foreign exchange specialists. These tools lock in future exchange rates, providing certainty for budget planning but typically involve costs and minimum transaction sizes.

Monthly loan payments in USD require ongoing currency management. Setting up automatic conversions through your bank can simplify the process, though rates may not be optimal. Dedicated foreign exchange services often provide better rates than traditional banks.

Some borrowers maintain a USD reserve sufficient for 6-12 months of loan payments, converting larger amounts periodically when exchange rates are favorable rather than making monthly conversions.

Currency fluctuations can create tax implications in your home country. Gains or losses from currency conversion may be taxable events depending on your jurisdiction. Consult with international tax advisors familiar with both US and home country regulations.

For financial statement purposes, the treatment of foreign currency loans varies by accounting standard. IFRS and local GAAP may require specific treatment of exchange gains and losses that affects reported results.

Establishing relationships with banks experienced in international transactions facilitates smoother payments. Look for institutions with competitive FX rates, reasonable wire transfer fees, and familiarity with aircraft transaction requirements.

Some aircraft lenders can provide guidance on banking relationships and may have preferred partners who understand the aviation industry. This can be particularly helpful for buyers new to US dollar transactions.