Lease Finance & Hire Purchase
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Indian Economy and Indian Financial System — JAIIB.
One-liners from this chapter
Free sample — 8 of 65 rapid-fire Q&A cards.
What is the primary distinction between a lease and a hire purchase agreement?
In a lease, ownership of the asset remains with the lessor throughout the contract period, whereas in hire purchase, ownership transfers to the hirer upon payment of all instalments including the final option-to-purchase payment.
What is the meaning of 'lessor' in a lease transaction?
The owner who grants the right to use the asset.
Which party is called the 'lessee' in a lease transaction?
The lessee is the party who takes the asset on hire from the lessor and uses it for the agreed period in exchange for periodic lease rentals, without acquiring ownership of the asset.
What is a 'closed-end lease' in leasing terminology?
A lease where the lessee has no obligation at end of term.
What is a 'finance lease' in the context of asset financing?
A finance lease is a long-term lease where the lessee bears substantially all risks and rewards incidental to ownership; it is also called a capital lease and is non-cancellable for the primary lease period.
What is an 'open-end lease' in asset financing?
A lease where the lessee bears the residual value risk at term end.
How does an 'operating lease' differ from a finance lease?
An operating lease is a short-term, cancellable arrangement where the lessor retains the risks and rewards of ownership and the asset is not fully amortised during the primary lease period, unlike a finance lease.
What is the 'hire' component in a hire purchase agreement?
The periodic instalment paid for use of the asset.
Video classes for this chapter
More chapters in Module D - Financial Products and Services
Related articles & notes
In-depth Indian Economy and Indian Financial System guides from our blog.
Master the full IEIFS syllabus
Every chapter of Indian Economy and Indian Financial System — videos, tests, notes and one-liner decks in one place.