What does "due diligence" encompass in leasing transactions?

Due diligence in leasing transactions is primarily concerned with assessing the risk associated with the asset and the creditworthiness of the lessee. This includes a thorough evaluation of both the asset being leased—such as its condition, value, and relevance to the lessee's business—and an analysis of the lessee's credit profile to determine their ability to meet lease obligations. By evaluating these factors, leasing professionals can make informed decisions that help mitigate potential risks and ensure that the lease arrangement is financially viable and secure.

Other options, while related to aspects of leasing, do not fully capture the essence of due diligence. Negotiating better lease terms is part of the leasing process but does not encompass the comprehensive risk assessment that due diligence requires. Preparing financial statements may support the decision-making process but is not itself a due diligence activity focused on evaluating a lease transaction. Obtaining insurance for the asset is an important step in managing risk after due diligence but is not part of the due diligence process itself. Thus, evaluating the asset and the lessee's credit profile stands out as the most accurate representation of what due diligence encompasses in leasing transactions.