REMEMBER WHEN LEASING

a car was

cheaper than buying one? Just three years ago before the era of super-low APRs, fat rebates and five-year car loans leasing was easily the cheapest way to get low monthly payments on pricey SUVs and other status autos.

But the economic downturn forced manufacturers to resort to unprecedented measures to keep cars moving off of their lots. Suddenly, leasing was about as popular as Internet stocks.

What goes around, comes around. Industry experts say leasing is starting to regain popularity. That's because, as the economy improves, manufacturers will look for alternative ways to put drivers in new cars, says Paul Taylor, chief economist at the National Automobile Dealers Association (NADA).

One way to do that is by pulling a somewhat forgotten marketing lever, says Bob Kurilko, vice president for marketing and product development at car information Web site Edmunds.com. "Leasing is the next marketing approach," he says. "It's fresh, it's new, and it does give the consumer a lower monthly payment."

In other words, as those 0% financing deals dry up (which is already starting to happen), many car buyers particularly those who like to drive an auto that impresses the neighbors may have to consider leasing once again as a means of managing their monthly payments. But this doesn't mean the deals will be the same as those seen in the mid-1990s. Manufacturers will likely roll out creative leasing terms, such as longer leases that bring monthly payments down to dirt-cheap figures, says Taylor.

Before you lease a car, however, it's essential to be able to recognize a good deal from a bad one. To keep monthly payments in check, lessors (which can be an independent bank, the manufacturer's finance arm or a separate finance company that actually sells you the deal) can fiddle with the lease term in ways that could cost you dearly if you don't know all of the details. "A lease deal is very complicated," says Rob Gentile, manager of Consumer Reports' new-car price service. "The manufacturer can structure a deal to look like it has a low monthly payment, but you may not be paying as low as you possibly can."

And don't let those slippery salesmen give you the brush off: By law, they have

1. What's my car's total purchase price?
When reviewing a lease deal, many people focus only on their monthly payment. That's exactly what the dealer wants you to do so he or she can walk away with a thick profit that could otherwise have been negotiated. Instead, train your eye on the total purchase price of the car. And remember, there's probably a healthy difference between the wholesale price (the price the lessor paid for the car) and the price on which he's based the lease. "Once you agree upon a price that's fair, base your lease terms on that price," says Consumer Reports' Gentile.

You can purchase a detailed new-car price report from ConsumerReports.com for $12, or search through Edmunds.com's free True Market Value database, which lists the invoice price of new and used cars.

2. What's my car's residual value?
Everyone knows the main reason that leasing is much cheaper than buying is that you're not paying the whole cost of the car, but rather just the difference between the car's current value and its estimated future value when you return it. A nifty trick lessors sometimes pull is inflating the estimated future value of the car, so that this difference becomes smaller and you get lower monthly payments.

That's all well and good if you don't intend to buy the car at the end of the lease. But if you do, you'll wind up paying more than the car is worth. What few people know is that at the end of the lease, you can negotiate that residual value, explains Edmunds.com's Kurilko. Say your car's contracted residual value was $12,000, but it's only worth $10,000 at the time you're handing it in. Your lessor will most probably be willing to sell it to you for that $10,000 instead of paying all the reconditioning, disposal and transportation costs necessary to resell the car, Kurilko says. "They're still coming out ahead because they don't have to remarket the car. If they can save those expenses, they'd do it."

To find out how much your car will be worth at the end of your lease, use Edmunds.com's used car appraiser.

3. What's my money factor?
To make this process just a little more complicated, lessors have invented new terms for old things. A prime example is the so-called money factor, which is lease-speak for the interest rate. Don't worry: It's easy to convert, so you can figure out if you're paying outrageously high interest on your lease. All you need to do is multiply the money factor by 2,400. So if your money factor is 0.0023, for example, that means you're leasing at a 5.52% interest rate. (Why 2,400? That's just the way it is.) That 2,400 figure is used as a multiplier, regardless of the length of the loan.

Why do you need to know that? If you have stellar credit and your dealer is still quoting you a money factor that adds up to a rate that's higher than the current market rates for car loans (which these days range from 5% to 5.3%, according to Bankrate.com), you should certainly try to negotiate, or look for a better deal with other lessors. Using Edmunds.com's True Market Value finance tool (go to the Web site's Finance and you'll see which interest rates to expect based on your credit rating. You also can crunch your numbers in our Net Interest Calculator.

4. What's my mileage limit?
"We're starting to see some lease deals with lower monthly payments, but lower mileage limits as well," warns Gentile. So instead of the common 12,000 or 15,000 miles a year, a stingy dealer might offer you just 10,000. "While that lease deal may seem attractive, in the end you may have to pay a lot more if you go over the limit," Gentile says. Don't forget: Lessors typically charge 15 cents for each additional mile.

The solution: If you know you'll be driving more, but still want a particular deal, buy your miles in advance. "It's really darn cheap," says Edmunds.com's Kurilko. If you upgrade to 15,000 miles on a 12,000-mile lease, you'll be paying about four cents a mile. If you'll need more than 15,000 miles, it's eight cents a mile. That said, if you plan to buy the car at the end of the lease, you don't need to count your miles you won't be held accountable since you won't be turning in the car.

5. What's my lease term?
One result of manufacturers' efforts to mass market leases is a greater variety in lease terms from 24 months all the way up to 60 months or longer, according to NADA's Taylor. "With short leases, a manufacturer's leasing arm is trying to capture the customer who wants to drive a new car every few years," he says. "With long-term leases, they cater to those who are looking for a lower monthly payment."

Of course, there's more to deciding on the length of a lease than how long you want to keep the car, says Gentile. One of the most important factors to consider is the length of the car's warranty. "You don't want to lease a car beyond the basic warranty, because if it breaks down you'll have to pay those repair costs out of pocket," he says. "And they're repair costs on a car you'll never probably own."

6. What about sales tax?
Sorry. When it comes to leasing, taxes are even more complicated than usual. That's because each state assesses sales tax differently. In 28 states, you'd be charged sales tax on your monthly payments. But in Maryland, Illinois, Texas, Virginia and nine others, you'll pay sales tax on the total sale price of the car. That's a lousy deal, especially if you decide to buy the car at the end of the lease, at which point you'll pay sales tax again. If you live in one of these states, think twice before you lease or ask the lessors if they make up for the higher taxes by lowering some of the other components of the lease. In three states (Montana, New Hampshire and Oregon), you'll pay no sales tax at all but they make it up you in property tax on the vehicle. Still other states charge taxes in a way uniquely their own. In Delaware, for example, you'll pay 1.92% on your monthly payment and 2.75% on the sales price.

If you don't already know how your state will tax your lease, call your local motor-vehicles department. Keep in mind that sales tax is non-negotiable. So if you live in Texas but you don't want to pay tax on the whole price of the car, there's pretty much nothing you can do about it.

That said, there is a small window of opportunity for small-business owners. If you have a corporation that's registered in a different state, you can lease the car in that state even if you don't live there and won't drive it there, Kurilko says. Many California residents register their corporations and vehicles in Nevada, which has more favorable tax laws, he says.

7. What about the down payment?
Don't pay down more than the lease terms require. Unlike financing, where a larger down payment will decrease your monthly payments and overall interest charges, putting down more on a lease has a big downside. As part of your lease deal, you usually get "gap insurance," which covers monthly payments until the end of the lease if you get in an accident. So if you pay up a larger down payment and wreck the car in a couple of months, gap insurance will cover the rest of your monthly payments, but all the money you paid up-front goes down the drain, Kurilko says. "I would put the money in my pocket and just pay the minimum down on the car," he says.