It's hard to believe, but Chrysler Financial is suspending all leasing of cars, at least for now. GM and Ford will continue, but with tougher restrictions.

The problem is that car values have dropped in this slow economy, especially SUVs, crossovers and trucks. With cars coming off-lease now worth less, automakers are losing money on them.

This may surprise you, but we've come around in recent years to believe that leasing a car may, for some, beat buying one – depending on your circumstances and if you negotiate a good deal.

No matter how nice a car you buy, a car is not a good investment. Why sink tens of thousands of dollars into a purchase that is guaranteed to depreciate in value? Plus, the average consumer spends $125 a month in routine maintenance, not counting repairs, once a car reaches the ripe old age of three years. It's no coincidence that most leases are three years.

The idea behind leasing is that you never plan to pay full price for the car; you just keep trading in your leased vehicle every three years (or less). When you lease you are essentially paying the bank's estimate of how much the car will depreciate by the end of the term. The residual value –the amount the bank anticipates the car will be worth when your lease expires – is the part you don't have to pay.

The more the bank expects the car to be worth at the end of the term, the lower your monthly payments will be. As a result, the monthly payment that fits into your budget may allow you to drive around in a more expensive car if you lease instead of buy.

The bottom line is that when you lease, you put the burden of the future value of the vehicle on the bank instead of on yourself.

Dolan Smart Money Move: For this reason, you should shop for a lease based on the residual value of the car, which we just talked about. You want the highest residual value you can find, which will mean lower monthly payments.

The residual value actually changes four to five times during the model year of the car. This is why it's generally better to lease a vehicle at the beginning of a model year, rather than toward its end. As the year goes on, the banks lower their residual values because the vehicle is getting older, even if it has never been driven.

For current models, look in the Black Book, which comes out quarterly and is available in the auto loan departments of many banks. Another good resource is the Automotive Leasing Guide online at www.alg.com. For a fee, you can get custom quotes. Click on the "Products and Services" tab and then "Custom Quote," and follow the directions.

Should You Buy or Lease?

We get asked this question a lot on our radio show. The only rule of thumb is there is no exact rule of thumb. The answer really does depend on your needs. We can say this, however: Generally, if you can afford a new car and intend to keep it a long time, buying probably makes more sense. We urge you to consider buying a used car, which already has much of the depreciation out of it. It's also worth researching leasing a used car.

As is often the case, you can figure out the best answer by doing a little homework. If you have a particular car in mind and you're torn, make these calculations to compare the costs and decide what's best:

1. Calculate the cost of buying a car: the down payment + monthly payments.
2. Calculate the cost of leasing the same car: the down payment (if any) + monthly payments + purchase option (you can make a rough estimate of this based on the current price of three-year-old models of that car).

Which figure is lower? That's the choice to go with. Remember, leasing is really just another form of financing. Either way, as long as you are paying for a car in monthly installments, the bank is the real owner!

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