Which of the following is NOT an advantage of leasing from the lessor's perspective (compared with offering a straight loan)?

A. Leasing has a relatively low default risk.
B. Administration costs may be lower for a lease than for a straight loan.
C. The return to the lessor may be higher than for a straight loan.
D. The lessor may use the funds for other investment opportunities.

1 answer

The statement that is NOT an advantage of leasing from the lessor's perspective (compared with offering a straight loan) is:

A. Leasing has a relatively low default risk.

This statement is not necessarily true as leasing can involve risks that are not as present in a straightforward lending scenario. While lessors may have means to mitigate default risk, leasing is not inherently associated with lower default risk compared to loans. The other statements do reflect potential advantages of leasing over a straight loan.