Mary has entered a lease arrangement with a financial institution for a car. Which statement is correct?

• A. The financial institution owns the car during the term of the lease
• B. The financial institution never owns the car
• C. Mary automatically becomes the owner when she signs the lease
• D. Mary automatically becomes the owner when she makes the first payment

Answer: (A)

In a lease, the owner of the asset remains the lender or lessor for the duration of the contract, while the lessee gains the right to use the asset in exchange for payments. That means the financial institution holds title to the car during the lease term, and Mary uses it under the lease agreement. Ownership wouldn’t pass just by signing the lease or by making the first payment; it would only change if there’s a specified end-of-lease buyout option and she chooses to exercise it. So the statement that the financial institution owns the car during the term is the correct understanding.