Is leasing a car right for you?

Car keys on loan application

Automakers are touting cheap leases on many popular models. And more lenders are getting into the leasing game.

That's because leasing a car has become ever more popular among the average consumer.

Why is leasing becoming so popular?

Leases can often provide a less costly way — at least up front — of driving home a new car or truck than taking out a conventional auto loan.

When you take out a lease, the finance company or bank buys the car or truck of your choice from the dealer, rents it to you for a specified period of time and takes possession of the vehicle when the lease is over.

It often requires less up-front cash than the typical down payment when you finance your ride with a loan.

Although the typical lease charges about $2,000 in acquisition fees and security deposits, some deals have no up-front costs. You don't have to write a check until the first monthly payment is due.

That, and surprisingly low monthly payments, can put you behind the wheel of a more expensive car or truck than you couldn't afford to buy with a loan.

But you've got to be sure that leasing is the smartest way to go.

Start by finding the best lease deals currently available on the car or truck you want.

Plug the up-front costs, monthly payments and other fees you find into our "Buy or lease?" calculator.

It will tell you whether leasing will be cheaper than buying the car or truck with a conventional auto loan.

If the numbers look promising, ask yourself these three critical questions. They'll help you assess all of the potential costs not covered by the calculator that could turn your lease into a more expensive deal than you expect.

Question 1. How many miles will I drive each year?

Leasing contracts typically allow you to put 12,000 to 15,000 miles a year on the car or truck.

Drive more than that, and you'll have to pay a penalty of 15 cents to 25 cents per mile, a penalty that can quickly tilt the scales against leasing.

If you're unsure of how many miles you drive in a 12-month period, dig up old auto repair bill for the vehicle you want to replace.

Those bills usually include odometer readings that can help you determine how much you've driven in the past.

Question 2. How much wear and tear will I inflict?

When you return a car or truck, the lessee expects it to be well-cared-for, showing no more damage than inevitably occurs as a result of normal use and age.

You can be charged extra for scratches, dents, tears and stains, especially if they're larger than the size of a business card.

Those penalties, or the cost of fixing that damage before you turn in the car or truck, can quickly turn leasing into a money-losing proposition.

If your kids, pets or work or driving habits make excessive wear and tear unavoidable, leasing is not for you.

Question 3. Is my life stable enough to live with a lease?

It's very hard, and very expensive, to return a vehicle before its lease is up.

You need to be absolutely certain that you can make the payments and live with whatever kind of car or truck you're signing up to drive for the entire length of the lease.

If your job is in jeopardy, or you're getting married or have a kid on the way, leasing could lock you into a car or truck you can no longer use or afford.

Once you're ready to commit to a lease, make sure you're familiar with the contract's most critical terms.

Does the lease include gap insurance?

It should. You want that.

Is this an open- or closed-end lease?

You should always insist on a closed-end contract.

Click here for our rundown of all the fees, charges and penalties you must know before signing on the dotted line.

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