medium · Asset-Backed Securities asset-nuances
An equipment lease ABS analyst is comparing a pool of 'finance leases' and 'operating leases'.
Which statement correctly identifies the primary difference in risk assessment?
- Finance leases are used exclusively for financing consumer vehicle purchases.
- Operating leases are structured like bullet bonds, repaying all principal at maturity.
- Operating leases introduce significant 'residual value risk' at the end of the lease term.
- Finance leases carry no default risk since the lessee holds an unconditional obligation to pay in full.
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