Difference between finance lease, operating lease, and hire purchase loan. I am not sure if cfa cover hire purchase in the curriculum. I am just asking out of curiosity.
A finance lease is essentially buying the asset on credit. At the end of the lease, the asset belongs to the lessee.
An operating lease is essentially renting the asset. At the end of the lease, the asset belongs to the lessor.
As far as I know, the curriculum doesn’t cover hire purchase loans.
In addition to the comment by S2000, a financial leasing has different accounting treatment for the expenses and the asset than under and operating leasing. Know well the differences and how both affect financial ratios.
Hire purchase loans are like financial leasing but for lower credit clients (probably more expensive, more encumbered and more bureaucratic).
Thank you so much in both of your answers. Cheers
My pleasure.