Is It a True Lease or a Loan?

<i>Part One of a Two-Part Series.</i>Anyone who has been in the leasing business for much time at all understands that a transaction that the parties describe as a "lease" can be either a "true lease" where the lessor owns the leased equipment or a "loan" which results in the lessee being the owner and the lessor having merely a security interest. The latter is commonly referred to as "disguised security interests" or "leases intended as security" or "financing leases." Many people also have a general understanding of the distinction between the two, and most of those reading this article have heard one person or another proclaim the bright-line rule that a lease with a dollar purchase option is a loan and a lease with a fair market value purchase option is a true lease.

23 minute readMay 01, 2004 at 04:21 PM
By
Ken Weinberg
Is It a True Lease or a Loan?

Part One of a Two-Part Series

Anyone who has been in the leasing business for much time at all understands that a transaction that the parties describe as a “lease”

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