Basically, you should pay cash. This is by far the cheapest way to pay for a new car. Leasing has no inherent advantage unless you can claim your lease payments as a tax deduction for business use. If you get a new car every three or four years, your overall cost of ownership will be about the same whether you lease or buy. If you keep a car longer, leasing usually makes less sense.

1. When you first walk into a dealer, tell them you will probably be paying cash for the car. Negotiate the price of the car, never monthly payments.

2. Once you agree on a cash price, turn around and ask what the lease payments would be on that price.

3. For the same exact car, monthly lease payments are lower than car-loan payments. You are only paying for the car's depreciation during the lease, plus the lease companies profits. For example, if a car is initially worth $25,000, but after 24 months is worth $15,000, you pay only $10,000 over 24 months. However, at the end of the lease term, you return the car and have nothing.

4. Don't be surprised if your car dealer is pushing leases. Leasing allows the dealership many ways to earn extra profits. One great way is imposing high surcharges for excess mileage. 15¢ a mile adds up mighty quick.

5. Shopping for a lease can be difficult. But to help matters, the Federal Reserve Board now requires a standardized federal disclosure form. The dealer is required to spell out many specific items about the lease agreement. Ask your dealer for this form when negotiating lease terms.

6. A lease contract will include four basic items. The term of the lease, typically two to four years, an annual mileage allowance, about 10,000 to 15,000 miles, the amount of each monthly payment, and the residual value (an estimate of what the car will be worth at the end of the lease).

7. Make sure you read all the fine print, early cancellation will cost you thousands of dollars.

8. At the end of the lease, you have three options:

° Return the car to the dealer or other predetermined place. It will be checked for mileage and wear and tear.

° Return the car and use it as a trade on another lease or purchase. This is only possible if the wholesale value is more than the residual value, as specified by your contract.

° Purchase the car from the lease company. Most contracts will allow you do purchase the car at the residual value, plus maybe a few hundred dollars more as profit for the lease company. You do not have to pay the stated amount in the contract, you should negotiate. A dealer will always take something over nothing.