If a lessor borrows money from a lender on a nonrecourse basis to purchase an asset that will be leased to another party, then the:
A) lessor is responsible for the loan payments whether or not the lessee pays the lease payments.
B) lessee must pay both the lease payment and the loan payment.
C) loan is considered paid in full if the lessee discontinues making the lease payments or terminates the lease early.
D) lessor is only obligated to pay the loan payments as long as the lessor is collecting the lease payments.
E) lender must pursue the lessor if the lessee fails to make the agreed upon lease payments.

Question

Quizplus · Accepted Answer

When a lessor borrows money on a nonrecourse basis, the lender does not have the right to pursue the lessor personally in case the lessee fails to make the lease payments. The lender only has a claim on the leased assets, and the lessor is only obligated to make loan payments as long as they are collecting lease payments. Therefore, the correct choice is D.

If a Lessor Borrows Money from a Lender on a Nonrecourse