Low Monthly Payments -- Since you are only paying off the depreciation on the car -- not its full value -- your monthly payments are much lower than if you opt to finance the purchase of the entire car over the same period of time.

Easy Turnover -- Assuming your car is in good shape, when your two or four years are up, just stroll into the dealer, hand over the keys, and drive out with a brand new car and a new lease arrangement. You don't have to bother with selling the car or haggling with a dealer over trade-in value. That was all taken care of beforehand.

Lack of Flexibility -- You pay a big penalty if you want out of the lease before the full term. Bailing out early may cost you as much as six extra months of payments, depending on your leasing company.

You May Pay Extra -- Most leases charge an extra 12 or 15 cents for each mile you drive over a certain limit. Typically the lease agreement grants 12,000 to 15,000 miles per year. (Drivers average 15,000 miles per year.) Also, you'll have to pay up for any damage to the car beyond normal wear and tear when you turn it in. One way to avoid the mileage charge is to buy more miles at a reduced rate (of around 10 cents) up front.

2. How often do you want a new car?
Leasing is attractive for people who want new wheels every three years or so. It saves you the hassle of selling your cars, and allows you to move from car to car with relatively steady low monthly outlays and low down payments. But don't lease if you like to buy a new car every year. Ditto if you like to buy one every seven or eight years. A purchase allows you to either buy a new car impulsively when you have a cash windfall or to forestall a purchase, nursing your old car along, if your income drops. With a lease, you lose a good deal of control over those decisions. If you foresee owning the same car for seven years or more, you'll save money by buying. That's because with a lease, you walk away from a car just when depreciation slows and -- under long-term financing -- equity begins to build.

3. How much do you drive?
Check your odometer. It's been keeping track of your driving habits for you. The ideal lease customer drives 15,000 miles a year and maintains a car in good condition. (Fifteen thousand is the average yearly amount you are allowed in most leases. Anything above that and you have to pay extra.) If you drive substantially less, you may be paying for depreciation you are not causing. You ought to think about buying. If you drive substantially more and still want to lease, you should negotiate the cost of the additional miles up front. After the end of the lease, many leasing companies charge 15 to 20 cents a mile for the additional miles you have driven, d with 10 cents a mile if you buy them up front.

4. Do you use your car for business purposes?
If you are deducting a portion of your car's depreciation from your taxes, you will be able to deduct substantially more if you lease. Interest paid on loans to purchase a car is not deductible. But when you lease, you can deduct depreciation as well as the implicit financing costs. The IRS does, however, limit depreciation deductions for certain luxury cars.

5. Do you worry about your car's resale value?
If you routinely cart around carpools of kids, a few dogs and lawn maintenance equipment, there's a good chance you will inflict some damage on the car's interior, which you may have to pay for later when you turn it in. So, if you're hard on your car, leasing may not be right for you. Ironically, you should also consider buying if you keep your car in immaculate condition. That way you can build up some equity and take advantage of its spotless interior or any improvements you've made when it comes time to sell. But, keep in mind, one of the advantages of leasing is that you get to lock in a resale value now. All those lease agreements mean lots of used luxury cars will turn over in two years, depressing the market value of all of them. If you worry about your car's resale value, leasing can provide some security.

6. How stable is your life?
If you foresee a move, kids, a divorce or a new job, and you don't have a clear idea where you will be in two or three years, don't lease. The money you save on a low down payment and low monthly outlays could be wiped out if you have to terminate early. When you cancel your lease early you typically owe all remaining payments minus allowances for the depreciation that hasn't happened yet. Basically, you should be almost certain you can stick with the terms of the lease before you sign on the dotted line.