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How to negotiate a car lease Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by offering you financial calculators and interactive tools that provide objective and original content. This allows you to conduct your own research and compare data for free and help you make sound financial decisions. Bankrate has agreements with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this site are from companies that pay us. This compensation may impact how and when products are featured on the site, such as the order in which they be listed within the categories of listing and other categories, unless prohibited by law. This applies to our mortgage or home equity products, as well as other products for home loans. But this compensation does affect the content we publish or the reviews you see on this site. We do not contain the universe of companies or financial offers that may be open to you.
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5 minutes read. Published August 9, 2022
Written by Allison Martin Written by
Allison Martin’s career began more than 10 years ago as a digital content strategist. She’s been featured in numerous prestigious financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping readers gain confidence to take control of their finances by providing clear, well-researched information that breaks down complicated subjects into digestible chunks.
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Are you considering a vehicle lease to drive around with style at a fraction of what you’d pay for the new car you want? Learning about the car lease process, including learning the latest terms used in the industry and the specifics of lease agreements, is a crucial part of landing a good deal. Looking around and examining the deals and specials offered by various dealers is another valuable step to help you negotiate a car lease with confidence, ensuring that you get the best possible lease agreement to meet your needs. If you visit an auto dealership to purchase an automobile the salesperson will expect you to make an offer lower than the price they are asking for. It’s not usually the case for lease agreements, however there is a step-bystep method to negotiate a car lease. 1. Be aware of the terminology It’s easy to become overwhelmed by the , especially if you do not work in the automotive sector. However, you can give yourself some advantage by knowing the jargon dealers use before you sit down to sign a lease contract. Here are some of the most common lease-related terms that dealers use. Acquisition fee This fee sometimes called the assignment fee or even the origination fee is a charge imposed by the dealer to create the lease. This cost can range from $0 to $1000, in accordance with Edmunds. If you don’t have the money to pay the initial acquisition costs at the time of establishing the lease, it can be rolled into your monthly lease payment. Buyout cost A lease buyout generally involves the purchase of a vehicle leased at the end of the contract, or in some instances before the deadline for ending. The buyout price is the amount that the dealer will charge if you decide to do this. Reduced cost of capCap costalso known as capital cost reduction are the upfront charges that decrease the amount you can finance. It could be a result of trade-in credits or incentives, rebates, and even making a larger down payment. Disposition fee Disposition fees pay for the cost of cleaning the vehicle and getting it in top condition for someone else to purchase when you return it. Gross capitalized cost The vehicle’s cost of sale, also referred to as the market value, is the cost that has been capitalized gross. “This can be described as a fancy word for the price of the vehicle plus any other fees tax, balances and balances,” says David Undercoffler the editor-in-chief of Autolist. Residual value Residual value is a projection of what the vehicle will be worth at the time of lease’s expiration. The value is calculated by depreciation and data from the industry. “With the residual value, the seller will estimate the value of the vehicle worth after you trade it in,” says Mike Quincy Auto tester and writer for Consumer Reports. “It’s established at the start of the lease and is used in calculating your monthly payment.” 2. Find deals Google search for “special lease offers” isn’t enough to find the best price. Make sure to go higher by creating an inventory of the offers you can find, and consider broadening your search to areas outside of your city. When you’ve compiled a list of lease deals that you like on the top brands and models, make sure to call each dealership to confirm the details. Also, you should ask about any other deals that aren’t advertised on the internet. 3. Begin the negotiations once you’ve narrowed your list, schedule an appointment with the dealer. Try out the vehicles you are considering and start the negotiations. Some of the things the dealer could be willing to discuss include the purchase price. Do you plan to 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 price. “This is an excellent price to negotiate at the beginning of the lease if you think there’s a decent chance you’ll decide to purchase the car at the end of the lease,” says Undercoffler. Negotiating the price of the buyout in advance is essential, because typically it’s not possible to negotiate this expense once a lease ends, says Undercoffler. Disposition fee You can be able to get a discount on the disposal fee if you don’t intend to sell the car or trade it in to a new lease after the lease agreement ends. Be sure to negotiate this prior to the start of the lease, rather than trying to work around it at the end period. Gross capitalized cost is often the reason that dealerships will offer low monthly payments as a selling point to draw customers. However, you must try to negotiate the vehicle’s selling price that is also the gross capitalized cost. Through negotiation, you could be able to get an affordable monthly installment without needing to resort to prolonging the lease. “The gross capitalized cost will impact the monthly installment and also the final buyout amount of the car. The price is completely negociable,” says Nathan McAlpine who is the proprietor of CarMate which is an auto broker firm. In some instances, however for instance, if dealers are offering an exclusive monthly lease deal, this cost may be difficult to bargain. In such instances the lease conditions are usually preset, says Undercoffler. The mileage allowance of most leases limit the amount of miles you are allowed to drive, usually to 10,000-12,000 miles per year. If you exceed the limit each year the lease will impose a penalty to pay. Do not be enticed into accepting a low mileage allowance if you are a frequent driver. Instead, ask for a greater allowance at a lower cost when you sign the lease so that you can save money when you turn the car in. “If you know you’ll be using more than the mileage allowance, it’s a very good idea to negotiate a higher limit on mileage for a one-time cost, or not charge whatsoever, as opposed to paying the cost per mile when the lease is over,” says Undercoffler. “Just be aware that if bargain for a higher cap on mileage, it’s going to decrease the residual value of the car and the buyout amount, since it will theoretically put more miles on it.” If you’re negotiating your allowance for mileage, you need to know about how many miles you drive. “If you purchase extra miles up front but you can’t claim the amount back if don’t use the miles,” says Quincy. Money factor The cash factor is the rate of interest you pay for leasing the car. If you’ve got excellent credit — typically 740 or greater- you shouldn’t have a problem securing the lowest rate of interest that the dealership offers. 4. Sign the contract You’ll need to review the entire lease agreement before you seal the contract. Lease agreements usually contain the following information: The required down payment the amount of down payment, if there’s one. The price of the lease is also known as the money factor or rent cost. The value of the vehicle at the beginning and at the end period of lease. The annual mileage limitation. A detailed fee schedule that includes the costs in wear and tear and excess damage and other charges you may incur at the end period. The cost to end the lease early. What can’t be negotiated While you can negotiate several fees, there are some limitations. However, you’re not likely to have much luck negotiating the following: Acquisition fees Dealerships typically do not waive the administrative fee however, they can incorporate it into your lease payment if needed. Residual value: This figure isn’t negotiable because it will account for depreciation and information from the industry. Plus, lowering the residual value by 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 It is possible to get a good bargain on a lease for a car however, you should do your research before visiting the dealership. Not only is it crucial to understand the terminology dealers use as well, but it is also important to compare offers from multiple dealerships, learn what’s negotiable and read the fine print on the lease agreement prior to signing the deal. Find out more
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Written by
Allison Martin’s work began over 10 years ago as a digital media strategist, and she’s since been featured in a variety of top financial media outlets including 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 dedicated to helping readers gain the confidence to manage their finances by providing clear, well-researched information that breaks down complicated topics into manageable bites.
Auto loans editor
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