Leasing a car is a method of financing where someone:

• A. purchases the car outright with a lump sum payment
• B. borrows money to buy the car and repays the loan over time
• C. receives ownership of the car at the start of the agreement
• D. pays to use the car for a specified period without owning it

Answer: (D)

Verified step by step guidance

1. Understand the concept of leasing: Leasing is a financial arrangement where an individual pays to use an asset, such as a car, for a specified period without gaining ownership of the asset.
2. Identify the key features of leasing: The lessee (person leasing the car) makes periodic payments to the lessor (owner of the car) for the right to use the car. Ownership remains with the lessor throughout the lease term.
3. Compare leasing to other financing methods: Unlike purchasing outright or borrowing money to buy, leasing does not involve ownership transfer. Instead, it is a rental agreement for a fixed term.
4. Recognize the financial accounting implications: Lease payments are recorded as expenses in the lessee's accounts, and the car is not listed as an asset on the lessee's balance sheet.
5. Apply the concept to the problem: Based on the description provided, the correct answer aligns with the definition of leasing, which is paying to use the car for a specified period without owning it.