What criterion helps distinguish a true lease from a secured loan?

• A. It is because the asset's market value.
• B. The lessor retains ownership and the lessee does not obtain ownership or a bargain purchase option at end of term.
• C. The lease term must be equal to the loan term.
• D. The borrower has to guarantee the payment.

Answer: (B)

The key idea is who has ownership and whether the lessee can eventually own the asset. In a true lease, the lessor keeps ownership of the asset throughout the term, and the lessee does not obtain title or a bargain purchase option to own it at the end. That absence of ownership transfer or a purchase option is what separates a true lease from a secured loan, where the borrower generally keeps ownership and the asset serves as collateral for the debt. The other statements don’t define the distinction: market value, matching terms, or payment guarantees don’t determine whether the arrangement is a lease versus a loan.