You’ve found the perfect ride, but the monthly payments don’t quite work for you. Leasing could be an option to get into the car you want for less, and you won’t have to settle for a cheaper vehicle. But before you sign on the dotted line, it’s important to understand that a lease is simply an extended rental arrangement – you won’t actually own the vehicle unless you buy out the lease at the end of the term.
What is a Car Lease?
A car lease is an arrangement between an individual (the lessee) and a dealership (the lessor) to rent a vehicle for a set period – usually between two and four years. You’ll remit monthly payments to the lessor to use the vehicle but must properly maintain the vehicle and adhere to the mileage restrictions and other limitations included in the lease agreement.
Lease payments are lower than auto loan payments because you’re not working towards owning the vehicle outright. Instead, you’re simply remitting payment to cover the cost of depreciation along with any applicable fees and interest.
Can You Negotiate a Car Lease?
Yes, it’s possible to negotiate a car lease. But before you move forward, you should understand which components of the lease agreement the lender may be willing to change to make the deal more favorable.
Capitalized Cost
The capitalized cost is the price of the vehicle, but you’ll likely have to remit payment for taxes and other fees that come with the lease agreement.
Down Payment
If you make a down payment, it’s referred to as a capital cost reduction that reduces the amount you finance to seal the deal.
Money Factor
It’s a representation of the interest rate in the lease agreement. Multiply this figure by 2,400 to get an idea of what you’ll pay in interest.
Disposition Fee
This amount is assessed to cover the cost of preparing the vehicle for a buyer when you turn it in at the end of the lease agreement.
Lease Takeover
Also known as a lease buyout, a lease takeover is the price at which you can acquire the vehicle if you wish to keep it when the lease term ends.
Are There Items Which You Can’t Negotiate on Your Car Lease?
There are two items that generally aren’t negotiable in car lease agreements.
Acquisition Fee
You’ll pay an administrative or acquisition fee when securing a car lease. Most dealers won’t waive it, but you may not have to fork over the total amount before driving off the lot if the dealer allows you to include this amount in the loan.
Residual Value
The residual value represents the amount the car is expected to be worth when the lease ends. It’s determined by industry data and set in stone, so you won’t have much luck getting the dealer to agree on a higher number.
Tips on Negotiating Your Car Lease
Negotiating the best deal on a car lease doesn’t have to be complicated or overwhelming. Here are some tips to keep in mind as you begin your quest for the perfect ride.
Learn the Terms
Dealers love to use lingo when negotiating lease deals. Therefore, take some time to learn the commonly used lease terms mentioned above before heading to the dealership to avoid any confusion when attempting to negotiate a lease agreement that works for you.
Do Your Research Beforehand
Search online for lease deals at dealerships in your city and surrounding areas you’re willing to travel to. Then, make a list of what you find and reach out to the dealerships to confirm the details of the offers listed online. It’s also worth inquiring about lease offers that may be available but not advertised digitally.
Shop Around
Make a shortlist of dealers with exceptional lease deals you’d like to explore further. Also, note the particular make and models that pique your interest.
Know the Dealership’s Stock
It’s best to go with a vehicle that’s available at the dealership. But if you have special preferences or the ride you want has to be ordered, the dealer likely won’t negotiate the best deal with you. So, reach out to the dealerships that are among your top selections to determine if they have what you’re looking for in stock.
Compare Lease Deals
Analyze the details of each lease offer to determine which are best. For example, you may find that one has a better interest rate, but the capitalized cost or acquisition fee is on the higher end.
Get Your Quotes Ready
Obtain at least three pricing quotes for vehicles you’re most interested in. The finance department at most dealerships can provide pricing information without checking your credit. Or you can cost estimates online – just be mindful that the figures could be lower than you’ll actually pay as they typically exclude fees found in most lease agreements or the financing terms are reserved for borrowers with excellent credit.
Determine the Car and Offer that You Want
Select the lease offer that works best for you and head to the dealership to begin negotiations.
Rethink Add-ons and Extras
Dealers sometimes pressure customers to add extended warranties and other extras to the lease agreement. So even if you find these products worthwhile, don’t feel obligated to buy them unless you’ve done your research beforehand.
