Car leasing makes a comeback

NEW YORK (CNNMoney.com) -- Auto leasing is, once again, becoming popular. The number of car leases is up 21 percent compared to last year, according to data from the automotive Website Edmunds.com.

"As interest rates rise, leasing is becoming a more attractive option for consumers," said Alex Rosten, Manager of Pricing and Market Analysis at Edmunds.com. "Leasing allows car buyers to have lower monthly payments and get better 'bang' for their buck."

Leasing is particularly popular among luxury car buyers because it allows them to get a nicer car for less money per month.

In a lease, the car is actually purchased by a finance company. The "owner" of the car, meaning the person who keeps and drives it, only pays for the dollar value the car is expected to lose during the period of time he has agreed to keep it.

That amount is divided into monthly payments and, in some cases, an initial down payment.

Leasing typically costs less money per month than a typical auto loan. But its important to note that if you decide to keep the car after the lease term is over, it will cost you more. Leasing, and then paying to purchase the car costs more, in total, than simply purchasing the car with an auto loan from the very start.

Philip Reed, Edmunds.com's senior consumer advice editor, has more tips for buyers considering a lease:

Limit your down payment. Down payments are not necessarily required for a lease. They do help lower monthly payments, but it is typically in the consumer's best interest to put little or no money down to fully benefit from the leasing's low finance rates.

Negotiate your mileage limit. Leases include a maximum number of miles that can be driven without incurring additional charges. The average American drives about 14,000 miles a year. Make sure your mileage limit actually matches your needs.

Negotiate the price of the car. Monthly payments are typically calculated based on the assumption that the cost of the car is the manufacturer's suggested retail price, or sticker price. Few cars actually sell for that much, however. Negotiate the price of the car just as you would if you were buying it before discussing what it would cost to lease it.

Shop around. Not all lease deals are heavily advertised. Individual dealerships can offer further discounts, as well. Compare offers for the lowest monthly payments and up-front costs.

Make apples-to-apples comparisons. There are many factors to consider in leasing. There is the down payment, monthly payments, term of the lease, allowed mileage, drive-off fees and interest rates. Consider all the factors before you make a decision.

___________________________________

Fuel economy estimates get overhauled

Gallery: Best sporty SUVs

Cars: the rolling entertainment hub

Feedback