When someone leases a car, typically, they can make a lower monthly payment than if they’d purchased the vehicle. That’s a key reason why leasing can be so appealing for many consumers. The lease lasts for a predetermined number of months and miles. At the end of the time period, the vehicle is usually returned to the dealership.
Alternatively, if there’s a purchase option, the person leasing it might decide to buy the vehicle outright. If, after mulling over whether to buy or lease a car, you decide to lease, you’ll have to negotiate with a dealer to get the vehicle and lease terms you want.
To help, here are eight tips on how to negotiate a car lease. (If you’re brand new to this process, it may also help to read about the basics of car leasing first.)
Related: Car leasing basics
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1. Know the terminology
Car leasing lingo has some different terms than the language used in buying or selling a car. For example, instead of a buyer and seller, there’s a lessor (the company leasing the vehicle) and a lessee (the person taking out the lease).
Typically, lessees prefer a closed-end lease, meaning one in which the two parties agree (from the start of the contract) on an estimate of what the future value of the vehicle will be. So, if the lease ends and the lessee returns the vehicle, they won’t owe more money because of depreciation, even if the vehicle is worth less than estimated in the original contract.
Residual value/future value is an estimate given by the lessor to share how well a car is likely to maintain its value during the lease period.
Other terms you will likely hear include:
- Lease acquisition fee: This is like an origination fee on a home loan. It’s an upfront fee that covers the cost of checking your credit scores, setting up the lease, and so forth.
- Disposition fee: This may be charged if you return the vehicle, and it’s intended to cover the costs of getting the vehicle in shape for resale.
- Rent charge: This is similar to the interest paid on a car loan.
If you’re ever uncertain about what a term means, ask or investigate. You can’t negotiate without understanding the terms of the discussion.
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2. Read the fine print
Lease terms can vary by dealership and by contract and it’s important to be clear about what you’re agreeing to in yours.
Overall, a lease resembles a car rental but for a longer amount of time, typically two to four years. You’ll pay to use that car for the agreed-upon time period and then, at the end, either buy or return the vehicle.
A typical lease allows you to put 10,000 to 15,000 miles on the vehicle each year. If you go beyond those limits, there is often a per-mile fee charged.
All of that information should be listed in the agreement, along with the car’s value (both the current one and its end-of-lease projections), the rent charge, amount of money that needs to be put down, penalties for late payments, and other fees, including for excessive wear and tear or damage.
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3. Ask about the cap cost
“Cap cost” is short for the vehicle’s “capitalized cost” and, as the lessee, you’d want this number to be as small as possible. Why? Because it’s the price of the vehicle.
It’s important to know that, with a leasing deal, when a consumer negotiates for a lower payment, the dealer may agree. But the catch is that, rather than lowering the price, they would probably extend the payment period, which doesn’t necessarily benefit the lessee.
Here’s an example. Let’s say a dealer offers a 36-month lease with a monthly payment of $400 (36 x 400 = $14,400). You want to reduce the payment a bit and so the dealership lowers it to $375. But the lease is now 42 months long (42 x $375 = $15,750).
So, rather than negotiating the payment, negotiate to lower the price of the vehicle. To reduce this figure, you may be able to apply to put money towards the lease or trade in another vehicle. Doing so is called a “capital cost reduction.”
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4. Leverage interest rates/APRs from other dealers
Search online for the vehicle you want and contact dealerships to get specifics about rent charges, APRs and special offers. Then pick the dealership where you want to start negotiations. During a car lease negotiation, don’t hesitate to bring up what you’ve learned about other dealerships and what they’re offering.
Some dealers may tell you that rent charges aren’t negotiable, but others might be more willing. What’s important: Know what dealerships, in general, are offering, and make sure that the contract you sign is reasonable.
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5. Be clear on mileage
Take an honest look at your mileage needs and compare that to what’s offered in the lease. If you don’t put lots of miles on your car, then you could ask for a lower monthly payment in exchange for a lower annual mileage limit. If, on the other hand, you put plenty of miles on the odometer, you can request a higher limit without an extra charge. Dealers don’t have to agree, but that’s all part of the negotiating process.
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6. Look at the manufacture date
This is different from the model year. The older the manufacture date, the longer the vehicle has been sitting on a lot somewhere. For example, a car can be a 2021 model but have been manufactured in 2020. To get this information, look at the vehicle identification number (VIN).
The tenth digit will indicate the date of manufacture with different manufacturers using different systems to indicate what that means. This may take a bit of investigative work, but the information is there. Searching for sites with VIN decoders like MyCarHelpline.com may help.
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7. Let the lessor know if you plan to buy the car
If you plan to purchase the vehicle once the lease period expires (known as a lease buyout), you may be able to negotiate the buyout price, lowering it beyond what the market value is expected to be. That will save you money when you’re refinancing the vehicle in your own name.
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8. Leverage your trade-in vehicle
When determining how to negotiate your car leases, consider the vehicle that you may turn in as part of the deal. The dealer will let you know the value of your trade-in (a number you can negotiate so come armed with info from Kelley Blue Book or another trusted industry source) and those funds can be applied to the lease to reduce your monthly payments.
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Lowering your car payments with auto loan refinancing
If leasing sounds appealing because of the lower payments, you could also consider auto loan refinancing before making your final decision. Refinancing involves taking out a new loan on your vehicle to pay off the current one, ideally at a better interest rate. This in turn can often lower your monthly payments.
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The Takeaway
If you were wondering, “Can you negotiate a car lease?” the answer is definitely “yes.” These eight tips can help you get the vehicle you want at more favorable terms.
If the goal of the lease is to get a car at a lower monthly payment, then refinancing a vehicle is another time-tested method to consider.
Learn more:
This article originally appeared on LanternCredit.com and was syndicated by MediaFeed.org.
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