Certified Professional Public Buyer (CPPB) Practice Test

Which of the following describes a partial payment lease?

1. Credits the lessee based on lease termination

2. Requires full payment upfront

3. Allows for renewal at the end of the term

4. Gives lessee credit for residual value of an asset

The correct answer is: Gives lessee credit for residual value of an asset

A partial payment lease is characterized by offering the lessee credit for the residual value of an asset at the end of the lease term. This means that when the leasing agreement concludes, the lessee may have the opportunity to receive a financial benefit corresponding to the asset's remaining value. This approach differentiates partial payment leases from other types, as it acknowledges the asset's depreciation and captures its value even after usage. In contrast, the other options do not accurately describe the nature of a partial payment lease. For instance, some leases might require full payment upfront, contradicting the essence of a partial payment arrangement. Additionally, while some leases do permit renewal at the end of the term, this aspect does not specifically define a partial payment lease. Lastly, crediting the lessee based on lease termination speaks more to the outcome of a lease rather than the inherent principle of partial payments and residual value across the duration of the lease.