A lease in which the lessor borrows from a bank or other lender to obtain the initial capital for the purchase of an asset and using the lease payments to pay the interest and principal on the loan is called a:
A)sales-type lease.
B)direct lease.
C)sale and leaseback.
D)leveraged lease.
E)synthetic lease.

Question

Quizplus · Accepted Answer

This is a leveraged lease, in which the lessor borrows the initial capital from a lender and then uses the lease payments to pay off the loan. The lessor is leveraging the lease payments to finance the purchase of the asset.

A Lease in Which the Lessor Borrows from a Bank