Mr. Eskeldson: I think the majority of people don't understand leasing and how it works. If you asked most people about leasing terms such as capitalized costs, capitalized cost reductions (the down payment on a lease) and residual values, they wouldn't know how to explain them. I talk to people all the time who have gone into a dealership with the intention to buy a car, and their salesman ended up talking them into a lease. Later, they said they were really sorry they got talked into it.

I also want to respond to the issue of repair costs. I've studied the typical vehicle repairs a consumer must pay during the first six years of ownership. They include brake jobs, tuneups, belts, hoses etc. I came up with a total repair bill of $1,200 to $1,500 over that six-year span. On a short-term lease, you would be exempt from those costs, but they are more than offset by the cost of higher car registrations and insurance rates that come from repeatedly driving a new vehicle every two years.

Mr. Tasca: You said maintenance costs on a six-year-old vehicle would roughly total $1,500, but that's barring any surprises. That's like saying a car is going to be mechanically perfect. How about an air-conditioner compressor? How about an electronic transmission? I can tell you that the most uncomfortable situation to be in is to be with a customer who has a major mechanical problem with a vehicle that is out of warranty. That's why the worst thing a consumer can do is to finance a car for five years. I will have that debate until I die.

Mr. Eskeldson: In my book, I've told people where they can buy a comprehensive, extended warranty that covers a car for six years. And it will cover all of those components at a cost of about $500. (Sources include the auto makers, some credit unions and major insurance companies.)

Mr. Tasca: I wouldn't buy an extended warranty from anyone but the auto manufacturer. But again, Mark, why are so many people leasing instead of buying their cars with long-term financing?

Mr. Eskeldson: Because consumers are attracted to the low monthly payments, and in most cases they are not financially sophisticated. They don't have enough cash to do the financially prudent thing, which is to put down as big a down payment as possible so you can finance for as short a period as possible.

Mr. Tasca: You're just looking at the dollars and cents. You're forgetting that if it weren't for leasing right now, and manufacturers' focusing on it, many people wouldn't be able to drive a new car. There aren't too many people that have money to put down on a new vehicle. But even when they do, there are a lot of wealthy people who prefer to invest in other things, rather than go out and pay cash for a new automobile. The fact is, most people are financially responsible, and they wouldn't be leasing if it wasn't good for them. You get a newer car that's safer to drive, and that makes all consumers happy.

When you have car companies that are willing to set residual values on vehicles that are higher than what those vehicles will really be worth two years from now, consumers can take advantage of the low payments. Car companies are aggressively subventing (subsidizing) these leases. They are almost making it impossible not to lease.

Mr. Eskeldson: OK, but the subvented leases only benefit those people who turn their cars in at the end of a lease. If they decide to buy the car at the end of the lease, they will end up having to pay an inflated price, because of the higher residual value.

Mr. Tasca: If the residual value is too high on a vehicle, I'll tell my customer to walk away from it. Let the car company take the loss. If the residual is too low, I'll give my customer the equity. That Villager I discussed earlier had a residual value of $11,000, but it was really worth $13,000, so the customer had $2,000 he could roll into another deal.

Mr. Eskeldson: But that's your choice. The customer doesn't have the legal right to keep the equity.

Mr. Tasca: The customer can buy the vehicle, and sell it, and make a profit if he wants to. Look, not everyone wants to keep a car six years. People like getting new cars. They don't do that now (by buying), because they can't afford it. That's why they went to five-year financing.

Mr. Eskeldson: I agree that if you walk into a dealership today, and you say, ``I have no money, but I can afford a payment,'' in the beginning you will spend a little less money with a lease. In the lease I cited earlier, a consumer would spend about $50 less a month than he would with a five-year loan. But I don't think $50 a month is substantial enough to make up for the fact that you will never own the car.

There are phony arguments that are used repeatedly to convince people to lease (such as) the lease-vs.-buy comparison that compares a two-year lease to a two-year car loan. In both cases, nothing is put down, so the loan payments begin to look like $600 to $700 a month. There's the argument that there's interest income lost on all of the upfront costs involved in buying. I think that argument is totally dishonest, because most people don't have the money to invest.

Mr. Tasca: Everyone has the right to their own opinion. But I just want everybody to understand this: There are lots of people, for a lot of different reasons, who enjoy having a new car every two years. And they love doing it with leasing.