Auto leasing has exploded in popularity in the last few years, particularly as car buyers are being more challenged to find affordable automobile financing alternatives in a tough economy.
If a low monthly car payment is your goal you will come across auto leasing offers. The payments are usually lower than auto financing rates because you generally do not pay off the entire purchase price. When you lease a car you are renting it for the agreed period of time from the leasing company. They will purchase the car of your choice and then lease it back to you.

Two factors helped cause the shift to leasing. First, new cars prices have rapidly spiraled upwards over the last few years, often putting prices out of reach of average buyers. Second, increased cost of housing, food, and other necessities of life have left less money in the monthly budget for transportation. The net effect is that people have become increasingly eager to find ways to make personal vehicles more affordable.

Before signing on the dotted line, you should keep a couple things in mind:

Length - Car leases require you to make payments for a certain length of time, which can range anywhere from 24 months to up to five years. Car leases may be hard to get out of -- make sure you understand what happens if you want to terminate early. Some leasing companies will allow you to transfer the contract.

Numbers of Miles - Most car leases limit you to 12,000 miles per year or less. If you go over this amount, it can be fairly costly; somewhere in the neighborhood of 10 to 25 cents for every mile over your limit. Many finance companies allow car leases to be structured to allow for extra miles (at a lower cost per mile than the overage fees), so make sure to ask for this upfront if you know you will be driving above the limit.

Wear and Tear - You should also be aware that the condition of our car will be assessed at the end of the lease. If there are any damages or excessive wear and tear you will most probably be charged for the repairs.

End of the Car Lease -  You may have an option to purchase your vehicle at lease-end for a specified price, if you choose. Or you may be able to use the car as a trade-in on a new car. Otherwise, you can simply return the vehicle to the leasing company and walk away. Be careful, however, because you might just have equity value in your vehicle that you don't want to simply give back to the leasing company.

Leasing can offer advantages but it may not fit everybody's needs and lifestyle. Furthermore, leases can be somewhat more complicated than new-car purchase loans and require greater care and preparation in order to get a good fair deal

Two types of car leases - open and closed

Closed-end leases, sometimes called "walk-away" leases, are most common for consumer leases today. This type of lease allows you to simply return your vehicle at the end of the lease and have no other responsibilities other than possible payment of excessive damage or mileage charges.

Closed-end leases are based on the concept that the number of miles you drive annually is fairly predictable (12,000 miles per year is typical), that the vehicle will not be driven in rough or abusive conditions, and that its value at the end of the lease (the residual) is therefore somewhat predictable.

At the time you lease, the leasing company estimates the vehicle's lease-end residual value based on the expected number of driven miles. If the vehicle is actually worth less than the residual when you turn it in, the leasing company takes the financial hit, not you.

Open-end leases are used primarily for commercial business leasing. In this case the lessee, not the leasing company, takes all the financial risks, which is not so much a problem for a business, since the cost can be expensed. Annual mileage on a business lease is usually much greater and less predictable than the average 12,000 miles-per-year of a non-business lease.

In open-end leases, you are responsible for paying any difference between the estimated lease-end value (the residual) and the actual market value at the end of the lease. This could amount to a significant sum of money if the market value of your vehicle has dropped or you drive many more miles than expected. Often, the residual for an open-end lease is set much lower than for a non-business closed-end lease, which reduces the lease-end risk, but can significantly increase the monthly payment amount.

Business Leasing
The term business car lease, sometimes called a "commercial vehicle lease," refers to the concept of leasing motor vehicles for use in a business, for business purposes.
Generally, a business car lease provides a more convenient and less expensive alternative to the cash purchase option.

Consumer Leasing
As a consumer, make sure you only agree to a closed-end consumer lease. Even though most non-business leases you'll encounter will be of this type, read your contract closely just to be certain. Most consumer lease contract forms will clearly state, at the top of the form, that it is for a closed-end lease.