We used a capsule (borrowed a friends) with our DD. But she was only in it for about 4 months as she just looked so uncomfortable in it by then. I have read that capsules are safer in accidents etc for small babies, but I'm unsure of how true it is? As Lucy said it is handy if bubs sleeps in the car then you don't need to take them out of a rear facing seat (not easy!!). We are now using a safe n sound maxi rider too and it is good, big and dd fits into it nicely and even at 7mths she is still rear facing (also apparently safer in an accident). It will last us until she's about 2 or 3.

If money is an issue, go for a rear facing seat which will convert. But if you can borrow a capsule for a few months then go for a capsule.