In leasing, which term describes the lessee's potential to own the asset at the end?

In leasing, which term describes the lessee's potential to own the asset at the end?

• A. Purchase Option
• B. Guaranty
• C. UCC Filing
• D. Purchase Agreement

Answer: (D)

In a lease, the purchase option is the right for the lessee to own the asset at the end of the term. This option may be exercisable for a predetermined price, and if it’s a bargain purchase option the price is low enough that buying the asset is typically advantageous for the lessee. That potential to own at lease end is exactly what the purchase option describes. The other terms don’t describe ownership rights: a guaranty is a promise by a third party to meet the lessee’s obligations, a UCC filing is a financing statement used to perfect a security interest, and a purchase agreement is a separate contract to buy the asset outside of or after the lease.

In a lease, the purchase option is the right for the lessee to own the asset at the end of the term. This option may be exercisable for a predetermined price, and if it’s a bargain purchase option the price is low enough that buying the asset is typically advantageous for the lessee. That potential to own at lease end is exactly what the purchase option describes.

The other terms don’t describe ownership rights: a guaranty is a promise by a third party to meet the lessee’s obligations, a UCC filing is a financing statement used to perfect a security interest, and a purchase agreement is a separate contract to buy the asset outside of or after the lease.