Leasing often gets a bad rap, and no wonder: Its confusing argot sounds like fodder for a course in high finance, and dealers have been known to slip bad deals past confused car buyers who simply wanted low monthly payments.

About 20% of new-car transactions are leases, but I'm convinced that more people should be leasing. As interest rates rose, car makers shifted incentives from rebates and low-interest financing to leases. If you know what you're looking for and negotiate smart - leasing can be a good deal.

1. Buying is cheaper than leasing. If you keep a car well past the day the loan is paid off (or you paid cash to begin with), you save money by buying. But if you trade in your car before the loan is paid off, the value of the trade-in is unlikely to cover the remaining balance on the loan.

For example, if you leased a new Chevrolet Malibu LTZ for three years, your monthly payments would be $489. When you turned in the car at the end of the lease, you'd pay a "turn-in" fee of $395 and then walk away. If, however, you bought the Malibu with a five-year loan at 7.9%, your monthly payments would be $546, and after five years you'd own the car free and clear.

But say you want another car after three years. To match the residual value written into a three-year lease, you'd probably have to sell the Malibu on your own rather than trade it in. Then you'd have to pay off the loan. Buying would leave you about $1,600 poorer.

2. It's nearly impossible to negotiate a good buy. However, leases are negotiable. But first you need a tour of the jargon:

Capitalized cost.The vehicle price is called the capitalized cost. You should haggle over this just as hard as you would haggle over the price if you were buying.

Money factor. Another crucial term is the money factor. The lower this number, the better (multiply it by 2,400 to get an estimate of the interest rate). Dealers are sometimes reluctant to reveal the money factor, so be persistent.

Residual value. Finally, the residual value is the value of the car or truck at the end of the lease.

An inflated residual value lowers your monthly payments, but it can also hand-cuff you.

A more realistic residual value will make it easier to sell the lease, trade your vehicle mid lease or buy the vehicle at the end of the lease, says Tarry Shebesta, president of Automobile Consumer Services, a leasing service in the US

3.If you want out early, you're stuck.

Several fee-based Web sites, including http://www.swap-a-lease.co.uk and http://easyleasetrader.com/, match people who want to get out of a lease early with those who want to assume a short-term lease.

This article was originally taken from http://www.kiplinger.com/columns/car/archive/2008/car0107.html