Typically, you have to choose only one kind of deal. For example, you must take the special lease deal — or take the low-interest purchase loan — or take the purchase rebate. In other articles we have discussed low-interest (or 0% interest) loans versus rebates (see 0% APR Loans – Good Deal or Not?). In this article, we’ll discuss leasing versus buying a car.

We’ll keep this discussion simple and easy to understand but if you need more details we suggest you visit LeaseGuide.com.

Car leasing is not renting as many people mistakenly believe. It’s not at all like apartment leasing or renting. It’s a form of financing, just as a loan is a form of financing. In fact, a car lease actually is a loan. However, monthly payments are lower than with a loan because you are only paying for part of the cost of the car — the part that you’ll be “using up” in the three years of your lease. Then you repay the remainder of the lease “loan” by returning the car at lease-end (or buying it).

Lease payments are typically only 40%-60% of loan payments for the same car, same term. For people wanting to minimize their monthly expenses, leasing provides a good way to do it. However, at the end of three years (or whatever your lease term is), you must return the car and start all over again. Very rarely will a lease car have trade-in equity. So, for people who normally like a new car every three or four years, drive an average number of miles each year, take good care of their cars, have a stable life style, and don’t get hung up over the “ownership” issue, then leasing is a good way to go.

On the other hand, if you decide to buy rather than lease your car, you make higher monthly payments to pay for the entire cost of the car. Once the loan has been paid off, you have some trade-in equity (what value is left after depreciation has taken its toll), or you can drive the car payment-free for years to come. Because you can spread your cost over a longer period of time, you can save money in the long term. So, for people who don’t mind higher monthly payments, normally drive their cars for years, drive a lot of miles, want to modify their cars, and prefer to have a time when they are payment-free, then buying will be better than leasing.

So the answer to the leasing vs buying a car question really depends on the individual. The right answer for one person will be wrong for another. Many people have been leasing their cars successfully for years. Other people, who know little about leasing make the mistake of choosing leasing based on nothing more than the lower payments it offers. To make a correct lease vs buy decision requires an understanding of how leasing works and how to determine if it’s right for you. Again, we suggest you read “Lease vs Buy?” at LeaseGuide.com for more details.

The answer: almost everywhere. Nearly every car manufacturer is currently offering some great special lease deals on at least a few of their models and styles.  With the exception of some General Motors leases, nearly all the lease deals now being offered come from non-American car makers.

These deals come and go. Some months are better than others. If you are looking to lease a Honda, for example, you missed the big $0-$0-$0-$0 promotion in March and April. However, the current Honda deals are almost as good.

Nearly all manufacturer-backed car lease deals are actually good deals and well worth considering if you like the models and styles being promoted. Most of the deals require some money up front (due at lease inception) but if you don’t have the cash, you would have to pay about $20-$30 more per month for every $1000 you can’t pay. It doesn’t change the fact that the lease is a good deal — it simply means you pay more per month to get the deal..

Most of the cheapest promotional lease deals are in the $200 range, more or less. These are generally 36 month leases, 12K miles per year, and usually require some down payment cash (as discussed above) and your first month’s payment.

Here are examples of some of the best lease deals going right now: 

• Honda Civic – $159 a month, $1399 up front
• Hyundai Sonata – $199 a month, $2399 up front
• Hyundai Elantra – $159 a month, $1399 up front
• Kia Sorento – $209 a month, $2669 up front
• Kia Soul – $129 a month, $2279 up front
• Mazda3 – $239 a month, $0 up front
• Nissan Cube – $199 a month, $2449 up front
• Nissan Altima – $199 a month, $2999 up front
• Scion xD – $187 a month, $837 up front
• 2011 Toyota Camry – $189 a month, $1999 up front
• Toyota Matrix – $149 a month, $2949 up front.

You can get free quotes on any of the above vehicles from Edmunds.com.The quotes will automatically include any cash-back rebates or discounts that are currently available.

Let’s just start by saying that most advertised car lease deals are backed by the car manufacturer and are generally good deals. What’s the catch? Well, the special lease deals you see advertised are usually for only one (or a few) model of that car. Many times, but not always, it’s one of the low-end models with the lowest prices. If you like that model, great. If not, you might not be able to get such a good deal on another model since the other models don’t have the backing of the car manufacturer.

So how you know if a lease deal is good, or not?

First, it helps to understand how leasing works. You can use LeaseGuide.com for that purpose.

There are essentially three factors that determine whether a lease is a good deal or not.

One is the sale price of the car. Yes, price is just as important when leasing as when buying. The lower the price, the lower the monthly payment. So if the dealer is offering a low price (or you can negotiate a low price), compared to the sticker price on the car, then you’re headed toward a good lease deal.

Next, money factor is important. Money factor is another way of expressing finance interest rate. Yes, you pay interest on a lease, just like with a loan. Money factor is expressed as a very small number such as .0022 or .00175. To convert to conventional interest APR, simply mulitply the money factor number by 2400. For example, a money factor of .0022 x 2400 = 5.28%. You can compare that rate to the national average new-car interest rate at Bankrate.com. At the time of this writing, the national average rate is 6.43%. Therefore, your lease rate of 5.28% would be a good deal — not great, but good.

Next, residual value is important. Residual value is the estimated lease-end resale value of the car you intend to lease. The higher the value, the lower your lease payment. It is usually expressed as a percentage of MSRP (sticker price) — not negotiated sale price — such as 55%. In general, any residual value over 50% for a 36 month lease is considered good. Some cars, especially many American car models, have low residual values and don’t make good lease deals. Brands such as Honda and Toyota, are examples of those with higher residual values and generally make good lease cars, especially when high promotional residuals are being offered to create attractive low payments.

Factors that have some affect but are not really important in a lease deal are down payment, fees, and mileage limits. Making a down payment, for example, simply lowers your monthly payment, but doesn’t doesn’t change the “goodness” of the fundamenal deal. And up-front fees can’t change a good deal to a bad deal. Mileage limits should be considered before leasing (do you drive more miles than allowed?) but the difference in one mileage limit (say, 12,000 miles per year versus 10,000 miles per year) may change the payment amount, but won’t change the value of the deal.

To summarize, a the value of any car lease deal is determined by the 1) negotiated sale price of the car, 2) interest rate (lease money factor), and 3) lease-end residual value. Again, if you need to better understand how car leasing works, we recommend LeaseGuide.com.

Mazda

Some of the deals even have $0 down and first month’s payment made for you. And no security deposit. This means you pay nothing up front (except for some possible official tag and registration fees that vary according to where you live).

Here are examples of some of the good Mazda leases available now:

2010 Mazda3 i Touring sedan – $270 a month, 42 months, 42K miles allowance, 0$ due at signing, $0 first month’s payment 

2010 Mazda3 i Sport sedan – $239 a month, 42 months, 42K miles allowance, 0$ due at signing, $0 first month’s payment

2010 Mazda6 i Touring sedan – $288 a month, 42 months, 42K miles allowance, 0$ due at signing, $0 first month’s payment

2010 Mazda6 i Sport sedan – $269 a month, 42 months, 42K miles allowance, 0$ due at signing, $0 first month’s payment

2010 Mazda5 Touring minivan- $317 a month, 36 months, 36K miles allowance, $2912 due at signing

2010 Mazda5 Sport minivan- $299 a month, 36 months, 36K miles allowance, $2894 due at signing

2010 RX-8 Sports coupe – $339 a month, 36 months, 36K miles allowance, $3434 due at signing

2010 Tribute i Sport SUV – $329 a month, 36 months, 36K miles allowance, $2924 due at signing

These special promotional Mazda lease deals have discounted prices, low money factors, and high lease-end residuals, which all together makes for low monthly payments — much lower than normal. If you have been thinking about a Mazda, now is a good time to lease.

If you don’t understand how car leasing works, you should. We recommend LeaseGuide.com as a good resource to learn about leasing and to determine if you are a good leasing candidate. Everybody isn’t.

For example, the Toyota Corolla LE with lots of extra equipment and options is being offered for $149 a month. This is a 36 month lease, 36,000 total miles allowed, and $1999 is due at lease signing. The $1999 includes a $1200 down payment, first month’s payment (standard in leasing), and a $650 acquisition fee (standard in leasing).

If you cannot afford the $1200 down payment, you can pay less but, of course, the monthly payment amount goes up. For example, if you can only afford $500 down, the payment goes to $169. If you can afford no down payment (but still pay the first month’s payment and the acquisition fee), the monthly payment goes to $182.

How can Toyota offer such great lease deals?

First, the price of the car has been discounted about $2000. Second, the lease-end residual value has been set much higher than normal, and finally, the lease money factor is .00002, which is equivalent to a very low 0.5% APR interest rate. The combination of these three things makes for a very low monthly lease  payment for this excellent automobile. It just doesn’t get much better.

If this explanation doesn’t make sense to you and you don’t understand car leasing, we recommend strongly that you learn how leasing works before you decide to lease. We suggest LeaseGuide.com, one of our sister web sites.

Volkswagen

Additionally, other models that don’t get 0% APR loans, do get low-interest (typically 1.9%) loan deals. Not all styles get such deals.

The above mentioned lease rebates (typically in the $500-$1500 range) only apply if the customer leases through Volkswagen’s captive finance company, VCI. The lease deals include reduced money factors (finance rates) and improved lease-end residual values to create low monthly payments.

If you don’t understand how car leasing works, we recommend that you read the Lease Guide at LeaseGuide.com.

Here are a few examples of current Volkswagen lease deals:

2010 Volkswagen Jetta – $199 a month, 36 months, 36K miles total allowance, $1999 due at signing

2010 Volkswagen Routan S - $289 a month, 36 months, 36K miles total allowance, $2499 due at signing 

2010 Volkswagen New Beetle – $199 a month, 36 months, 36K miles total allowance, $1999 due at signing 

2010 Volkswagen GTI – $279 a month, 36 months, 36K miles total allowance, $2299 due at signing 

2010 Volkswagen Golf – $199 a month, 36 months, 36K miles total allowance, $1999 due at signing

Honda

February 2010 is no exception.

In fact, Honda is offering more deals this month than usual. Typically, they only have special leases on one style within each of its model lines. It’s usually the low-end LX versions. However, for February (until 3/1/2010) they have also added some high-end EX models as well.

Honda leases are always genuinely good deals. They not only reduce vehicle lease price, but reduce money factor (finance charge), and raise lease-end residuals. Combined, these factors add up to a low monthly payment.

All the 2010 Honda leases listed below are for 36 months and 12K annual miles (36K miles total). All require cash due at signing. The cash covers the first month’s payment as well (in most cases) a capitalized cost reduction (down payment).

If you don’t understand how car leasing works, we strongly advise you to take the time to learn. Leasing works very well for many people, but not for everyone. We recommend LeaseGuide.com for a good, easy to understand guide to car leasing. 

Here are the current Honda lease programs:

Honda Accord LX Sedan – $199/month, $2199 due at signing

Honda Accord EX 6-cyl Sedan – $269/month, $2199 due at signing

Honda Accord EX 4-cyl Sedan – $219/month, $2599 due at signing

Honda CrossTour EX-L AWD – $429/month, $429 due at signing OR $369/month, $2499 due at signing

Honda CrossTour EX 2WD – $379/month, $379 due at signing OR $329/month, $2299 due at signing

Honda CR-V LX 2WD – $249/month, $2099 due at signing

Honda Civic LX 4-cyl Sedan – $179/month, $1799 due at signing

Honda Civic EX Sedan – $199/month, $1899 due at signing

Honda Civic DX-VP Sedan – $159/month, $1399 due at signing

Honda Fit – no lease deals but $500 dealer cash

Honda Insight LX – $199/month, $1799 due at signing

Honda Odyssey LX – $299/month, $2499 due at signing

Honda Pilot LX 2WD – $349/month, $2699 due at signing

All of the BMW car lease deals are for 36 months only and have a 10,000 mile average mileage allowance. Most also require a modest security deposit, roughly equivalent to one month’s payment, unless your credit score precludes it.

As you may know, car manufacturers create special lease deals by reducing the price of the car (on which the lease is based), combined with a low money-factor (form of interest rate) and high lease-end residual value. Most such deals are genuine good deals but have very specific conditions such as down payment requirements, annual mileage allowance, and model/style. If you prefer a different set of conditions, or prefer a different model/style you may not be able to get as good of a deal.

Here are some of the best lease deals currently being offered by BMW:

2009 BMW 135i coupe – $439 a month and $4614 due at signing

2009 BMW i28i coupe – $369 a month and $4294 due at signing

2009 BMW 335i AWD coupe - $489 a month and $5214 due at signing

2009 BMW 328i wagon – $489 a month and $4864 due at signing

2009 BMW 335d sedan – $489 a month and $5514 due at signing

2010 BMW 535i sedan – $559 a month and $5384 due at signing

2010 BMW 528i sedan – $489 a month and $5214 due at signing

2009 BMW  650i coupe – $809 a month and $7884 due at signing

2009 BMW 750Li sedan – $1039 a month and $8314 due at signing

The amount “due at signing” includes the first month’s payment, a down payment (cap cost reduction), an acquisition fee (bank fee), and possibly a security deposit. It does not include any official tag and registration fees that are local to your area. Furthermore, in most states, sales tax is added to your monthly payment.

If you want to better understand car leasing, see LeaseGuide.com for a complete leasing guide, lease payment calculators, and a Lease Kit.

General Motors car dealers were forced to establish individual relationships with local or national banks, credit unions, and finance companies if they wanted to continue to offer leases.

Now GMAC says times are better and they will get back into car leasing again, but in a limited way at first.  First, this new lease financing will be available in only 45 states, except for Michigan, Ohio, New Jersey, New York, and Connecticut, where the company already has a trial program already going on.

Furthermore, the new lease financing will only be offered on a few select GM vehicle makes and models — 2009 versions of the Cadillac CTS, Chevrolet Malibu, and Traverse, as well as 2010 versions of the Chevrolet Equinox, GMC Acadia, Buick Enclave, and Buick LaCrosse.

It’s yet to be seen if the leases that will be offered will be good deals or not. In the past, GMAC offered “subvented” lease deals that included good price discounts, low money factor, and high lease-end residual values, all of which contributed some excellent deals with low monthly payments.

If you have never leased before or don’t understand how car leasing works, we suggest that you educate yourself so that you will know a good deal when you see it, and so that you don’t make mistakes. A good web site to learn about leasing is LeaseGuide.com.

First is the very popular Honda Civic LX 4-door sedan. This is a great car that is no longer the dull small car of Honda’s past. It’s grown up and has become one of the most respected cars of any brand, make, and model.  The current promotional lease deal is $199/month with $1399 due at signing, for 36 months, 12K miles per year. 

Next is the Honda Accord LX 4-door sedan. This vehicle, along with all Honda models, has a reputation for being one of the most reliable, safest, and stylish car you can buy. The current lease deal being offered at $199/month is the best lease deal available from anyone right now. It requires $2199 at lease inception, is for 36 month, and 12K miles annually.

The last of the special Honda leases is for the very practical crossover Honda CRV LX small SUV. The deal is $239 a month for 36 months, 12K miles per year, and $2449 due at signing. This is an incredible deal on this vehicle.

Leasing is a little different than buying with a loan, and regardless of whether you lease a Honda or any other brand, you should understand how leasing works before you dive in to it. A good online resource for educating yourself about leasing is www.LeaseGuide.com.