Final answer:
A long-term rental agreement on a car, a form of secured long-term debt, is a 2. lease. Leasing typically involves lower down payments and monthly payments but may include fees for excessive mileage. In contrast, an auto loan involves borrowing money to buy the car and can entail credit checks, cosigners, and collateral.
Step-by-step explanation:
A long-term rental agreement on a car, which is a form of secured long-term debt, is commonly known as a 2. lease. When you lease a vehicle, you typically have to pay a smaller down payment compared to purchasing it outright, and the monthly payment is also lower.
However, this can come at the cost of additional fees if you exceed a certain mileage, often around 10,000 miles per year. In contrast, taking out an auto loan to finance the purchase of a car means you're borrowing money from a lender to buy the car, which you then own outright once the loan is paid off.
Loans often require income verification, a credit check, possibly a cosigner, and collateral, such as the car itself, which the lender can repossess if the loan is not repaid.