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How to negotiate a car lease Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by providing you with interactive financial calculators and tools as well as publishing unique and impartial content. This allows you to conduct research and compare information for free – so that you can make financial decisions with confidence. Bankrate has partnerships with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this site are from companies that pay us. This compensation may impact how and when products are featured on this website, for example for instance, the sequence in which they appear in the listing categories and other categories, unless prohibited by law. Our mortgage or home equity products, as well as other home loan products. However, this compensation will affect the information we publish, or the reviews that appear on this website. We do not cover the vast array of companies or financial offers that may be open to you.
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5 min read Published on August 9, 2022.
Written by Allison Martin Written by
Allison Martin’s work began over 10 years prior to that as a digital content strategist. Since then, she’s been featured in a variety of top financial media outlets such as The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping readers gain confidence to control their finances through providing concise, well-studied and well-researched content that breaks down complicated subjects into bite-sized pieces.
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Are you considering a car lease that lets you drive elegantly for a fraction of what you’d spend to buy an entirely new car? Understanding the process of leasing a car, including learning the latest business terminology, as well as the details of lease agreements, is an important part of finding a bargain. Shopping around and exploring the offers and discounts offered by multiple dealers is a good way to help negotiate a car lease with confidence, ensuring that you get the most suitable lease contract for your requirements. If you visit an auto dealership to purchase an automobile the salesperson is expecting you to make an offer lower than the price they are asking for. However, this isn’t often the case with lease deals, but there is a step-by step procedure to negotiate a lease. 1. Be aware of the terminology It’s easy to become overwhelmed by the , especially if you do not work in the automotive business. But you could get yourself some advantage by knowing the terms dealers use prior to you are sitting down to sign a lease contract. Here are some of the most common lease-related terms used by dealers. Fee for acquisition The acquisition cost, which is sometimes also known as the assignment fee, or the origination charge, is assessed by the dealer to create the lease. The amount of this fee can vary between a few dollars , according to Edmunds. If you do not have the money to pay the acquisition fees up front when initiating the lease you can roll it into your monthly lease payments. Buyout price A lease buyout generally involves purchasing a leased vehicle at the end of the lease or in some instances before the scheduled end date. The buyout price is the amount the dealer will charge you if you opt to take this step. Cost reduction cap Cap reductionor capital cost reduction are the upfront payment that reduces the amount you can finance. This could include trade-in credits as well as rebates, incentives or even a bigger down payment. Disposition fees Disposition fees are the expenses associated with cleaning the vehicle and getting it in good condition to allow someone else to buy it after you return it. Gross capitalized cost A vehicle’s cost of sale, also referred to by the term “market value, is the cost that has been capitalized gross. “This may be a fancy name for the cost of the vehicle , including any other charges such as balances, taxes, and other charges,” says David Undercoffler the editor-in-chief of Autolist. Residual value value is a projection of what the car is worth at the end of the lease. This figure is determined by depreciation and industry data. “With the residual figure, the seller estimates the value of the vehicle worth when you turn it over,” says Mike Quincy, auto writer and tester of Consumer Reports. “It’s set at the beginning of the lease and used in calculating your monthly payment.” 2. Look for deals Google search of “special lease offers” will not get you the best deal. Make sure to go further by making an outline of all the specials you find and think about expanding your search to regions outside of your city. When you’ve compiled the list of lease offers on your favorite makes and models, contact each dealer to confirm the particulars. Also, you should inquire about any other offers that may not be advertised online. 3. Begin negotiations when you pare down your list, plan a visit to the dealership. Try out the vehicles you are considering and start the discussions. Some of the things the dealer could be willing to discuss include the purchase price. Are you planning to buy out take the lease out at the end of the lease? If so, the dealer might be willing to offer you an arrangement on the buyout cost. “This is a good cost to negotiate at the beginning of the lease if you feel there’s a decent chance you’ll be looking to purchase the car at the end of the lease,” says Undercoffler. Negotiating the price of the buyout upfront is crucial, because typically it’s impossible to negotiate the cost once the lease has ended, says Undercoffler. Disposition fee You may be able to be able to get a discount on the disposition fee when you don’t plan to turn the vehicle in or exchange it to another lease once the lease expires. Make sure to negotiate it prior to the start of the lease instead of trying to get around it at the end or the end of your lease. Gross capitalized cost Often dealerships will offer a low monthly payment as a selling point to attract buyers. But, it is important to consider negotiating the vehicle’s sales price that is also the capitalized gross price. By negotiating, you may be able to get an affordable monthly cost without having to resort to extending the lease term. “The capitalized gross cost will affect the monthly payment and also the final buyout value of the vehicle. The price is completely to be negotiated,” says Nathan McAlpine, owner of CarMate, an auto broker company. In certain circumstances, however like when a dealer is offering a specific monthly lease special it could be difficult to bargain. In these instances the lease conditions are generally predetermined, according to Undercoffler. The mileage allowance of most leases restrict the amount of miles you may drive — usually between 10,000 to 12,000 miles per year. If you go over the annual limit, there will be a penalty to pay. Beware of being enticed by a low mileage allowance if you drive a lot. Instead, ask for a greater allowance at a lower cost at the time of establishing the lease to save cash when you hand the car in. “If you are certain that you will exceed the allowance of mileage and you’re not sure, it’s a good option to negotiate a higher mileage cap for an up-front feeor with no cost in the first place, instead of paying the fee per mile after the lease is over,” says Undercoffler. “Just be aware that if negotiate a higher mileage cap will decrease the value of the vehicle as well as the buyout amount, since the vehicle will theoretically have more miles on it.” If you’re negotiating your mileage allowance, it’s important to know about how many miles you drive. “If you pay for extra miles upfront and you don’t get the amount back if do not use the miles,” says Quincy. The money factor determines the interest rate you pay for leasing the car. If you have very good to excellent credit — typically 740 or higher -it shouldn’t be difficulty securing the lowest rate of interest that the dealership will offer. 4. Seal the deal You’ll want to go through the lease agreement before you seal the deal. Lease agreements typically contain the following information the down payment required, if there is one. The lease’s cost which is sometimes referred to as the money factor or rent charge. The value of the car at the start and end period of lease. The annual mileage limit. A detailed fee schedule that includes the cost of wear and tear, excessive damage, and any other costs you might incur at the conclusion of the lease. The cost to end the lease in advance. What can’t be negotiated While you are able to negotiate a variety of charges, there are limitations. However, you’re not likely to be able to negotiate the following fees: Acquisition fee: Dealerships generally do not waive the administrative fee however, they can roll it into your lease payment if needed. Residual value isn’t negotiable because it is a way to account for depreciation as well as industry data. Additionally, reducing the value of residuals too much means the dealership could be unable to recover the cost if you decide to purchase the vehicle instead of selling it. The bottom line is that it’s possible to find a great bargain on a lease for a car however, you should do your research be sure to do your research prior to going to the dealership. Not only is it essential to know the terms dealers use as well, but it is also important to evaluate offers from different dealerships, learn what’s negotiable and read the fine print of the lease contract prior to signing the contract. Find out more
Allison Martin’s career began more than 10 years prior to that as a digital content strategist. Since then, she’s been published in numerous prestigious financial publications such as The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain confidence to control their finances through providing concise, well-researched and well-researched content that breaks down otherwise complex topics into digestible chunks.
Auto loans editor
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