Buying an automobile has become remarkably easy, and presents credit-challenged consumers (or consumers without established credit) an excellent opportunity to get established or re-established. However, as with any type of financing, consumers entering into an auto purchase or lease arrangement should be knowledgeable about the terms of the agreement, and alternatives that may be available to them.

One of the most popular ways to get into a brand new car is through an auto lease, which often carries low monthly payments, and no down payment or security deposit. The benefits are taken up front by the consumer, who gets the car without having to put out a lot of money. At the end of the lease term however, the consumer must settle up, and make a large lump-sum payment- the balloon payment.

But what happens when the lease term ends, and you're no richer than you were when you started, and that balloon payment seems impossible to make? There are alternatives. If payments have been made on a timely basis throughout the term of the lease, it may be very possible to re-finance the balance due with a conventional loan that uses the car as collateral; or if your credit is excellent, to obtain an unsecured loan. If you have another large asset, such as equity in a home, you may also be able to leverage this to pay off the balloon.

You can, of course, simply return the car at the end of the lease term. The lender will, however, calculate the current value of the car, and include any penalties you may have incurred for mileage overages, and balance this against the balloon payment due. It may be possible that even with returning the car, you will end up owing some money. Because payments are often low and down payments are not required, it does happen with surprising frequency that a car's value at lease-end is lower than what is due for the final payment. Keep in mind that a car loses much of its value during the first year on the road--so even with a conventional loan, it is not unusual for a consumer to owe more than the vehicle is worth, especially during the first year or two. This is more a factor of the nature of how fast cars depreciate than it is an inequitable financial contract. The only real way to avoid having an "upside down" contract is to pay more money up front. But barring that, the best way to keep this inequity to a minimum is to purchase a car that retains its value over time.