What factor primarily distinguishes lease financing from traditional financing?

The primary distinguishing factor of lease financing compared to traditional financing is that lease financing involves leasing assets rather than purchasing them outright. When an organization opts for lease financing, it effectively acquires the right to use an asset for a specified period without transferring ownership. This arrangement allows organizations to preserve capital since leasing typically requires lower upfront costs compared to purchasing an asset.

In contrast, traditional financing usually entails acquiring ownership of the asset through borrowing funds, which leads to the immediate responsibility for both the asset and its long-term financing obligations. By choosing lease financing, entities can maintain flexibility and manage their cash flow more efficiently as they can return, upgrade, or lease new assets as needs change.