New cars are expensive. In a ten-year period, while inflation grew only about 40% (based on the Consumer Price Index), new car prices rose more than 70%. Today the average new car cost well over $25,000! Anyway you cut it, that’s a lot of money. Since we as Americans have been sold on the idea that it is our birthright to get another vehicle with that "new car smell" every couple of years, paying for our cars has become a major financial issue in many of our homes.

In my travels to over 175 churches and colleges nationwide, I've received a lot of questions about cars and how to buy them the right way.

Although I say this with tongue in cheek, there are three ways to buy a car — and, in my opinion, they are not all equally good. I call them the Good, the Bad, and the Ugly. Let’s take a quick, snapshot overview of these three options in ascending order:

1) The Ugly: Leasing. As car prices went higher and higher, people held onto their cars longer (from 3-4 years up to 7-8 years). Something had to be done to get people back into new car showrooms. The answer: leasing. The promises of lower payments, less hassle, and a new car were compelling to many buyers.

My personal belief, however, is that car leasing is the least attractive way for most people to buy a car. Yes, I’ve heard all the benefits of leasing. At least theoretically, there can be business tax savings, reduced down payments, lower monthly costs, extra insurance coverage, reduced trade-in inconvenience, and other reasons. But since there is so much pro-leasing advertising (roughly 30% of all new cars today are leased), I’m not going to take the space here to make the case for leasing.

I am, however, going to bring some balance to the discourse by sharing some of the things about leasing that concern others and myself. To begin, no matter what you may have been told, a typical car lease is really a long-term rental agreement that may or may not have a purchase option at the end. A car lease is not the same as a car loan! And in a lease, unlike an outright purchase, unless you exercise your option and buy the car, you end up with no ownership or equity. A car loan payment may cost you more per month, but at least you are buying ownership in the car.

Many people believe that dealers prefer leasing because it maximizes their profits. This probably occurs for several reasons including higher fees, lower discounts, and the fact that lease contracts are confusing to many buyers. Add to that the horror stories of high turn-in costs for extra mileage, or what the dealer claims are excessive wear and tear, and you have more reason for pause.

2) The Bad: Car Loans. As you know, I have a bias against borrowed money. Every debt in a person’s life is just that much more bondage he or she is under. It is my goal to be as debt-free as possible — including with my cars. So, do I think it’s wrong to borrow money to buy a car? No. As a matter of fact, there are some occasions when it may be the best option. But remember, that is the exception — not the rule. Most car loans are made because of wants, not true needs.

But, now that I’ve talked myself blue in the face, if you feel that a car loan is the only possible way to go, there are some things to consider. Many people who negotiate great deals when buying their cars lose all their gains when it comes time to arrange the financing. Today, some dealers make more money handling car financing than they do actually selling cars! Dealers frequently bring in consultants and hire specialists to run their "F & I" (finance and insurance) departments. These guys are smart and they tend to know how to maximize the profit potential on the "back end of the deal."