How to get the lowest lease payment

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How to get the lowest lease payment

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Negotiating a car lease can be similar to negotiating a car loan in some ways  but with different terminology and standards.

Learning how to negotiate a car lease isnt necessarily difficult. But if you havent leased a vehicle before, you may not know all the language used during the leasing process, or which parts of your leasing deal are up for discussion when you arrive at the dealership.

Well walk you through some of our top tips for how to negotiate a car lease, to help you drive off the lot feeling as if you made an informed decision.Does an auto loan make more sense for you? Explore Loans Now


4 tips for negotiating the best price on a car lease

Negotiating is an art. To negotiate successfully, you need to be educated about the process and how to get the best deal.

1. Know the terminology

The terminology used in the car-leasing process is different from the terminology involved in buying a car. Here are some important terms to brush up on before you head to the dealership.

  • Lessor/lessee: In a lease contract, the leasing company is the lessor and the person leasing the vehicle is known as the lessee.
  • Gross capitalized cost: This includes the price of the vehicle, plus any agreed-upon services and fees added to the price. Its similar to the total cost of the car.
  • Residual value: This is also known as the future value of your vehicle. The lessor will determine this based on how well it expects that particular car to retain its value over the course of your lease.
  • Rent charge: This is a major cost of leasing a vehicle and is similar to interest on an auto loan.
  • Disposition fee: This is a fee the leasing company may charge if you return the vehicle. This fee is meant to offset its costs to recondition your vehicle for sale after youve returned it at the end of the lease.
  • Closed-end lease: Youll probably want a closed-end lease, which means youve agreed upon the future value of your vehicle at the beginning of your contract. That means even if its worth less when you return the car, you wont owe any more money to the leasing company because of the additional depreciation.

2. Research prices and deals

Before heading to the dealership, its good to research any lease deals that may be available for the models youre interested in. Look for manufacturer incentives and advertised specials as a starting point for your negotiations.

Make sure you look into the typical sales price for the cars you want. Although you arent buying a new car, you can negotiate the price of the car just the same. The lower you negotiate the price, the less depreciation you may have to pay for over the life of the lease if all other terms remain the same. That may mean a lower monthly lease payment, too.

3. Shop multiple dealerships

Its a good idea to shop around at multiple car dealerships, compare prices and deals on the car you want to lease.

You can try to make dealers compete for your business by shopping your best offer around to see if another dealership can beat it. You can then decide if you like that offer or want to keep car shopping. Always be ready to walk away if you dont find a deal that you can afford.

4. Be open to other car models to find the best deal

Just like when you buy a car, dealerships may have an incentive to offload certain cars on their lot. If youre open to leasing more than one specific make or model, you can take advantage of these opportunities to potentially score a sweet deal on your lease.Does an auto loan make more sense for you? Explore Loans Now

Car lease terms to negotiate

When youre ready to negotiate, there are certain common items you should consider up for discussion on your lease.

Capitalized cost

The capitalized cost, sometimes called cap cost, is a good place to start negotiating. Youll want this number to be as low as possible since this affects your monthly payments. Research what the vehicle actually costs the dealer through a site like Consumer Reports to get a better idea for a potential price range.

You may also be able to reduce this charge by applying adown paymentortrade-invehicle as part of the deal. This is also known as a capital cost reduction.

Rent charge or money factor

Some dealers may say the rent charge  also known as the money factor  isnt negotiable. Other dealers may mark up the rent charge to improve profit. The key is making sure this number is reasonable based on current interest rates and what other dealers are offering. If it isnt, consider taking your business elsewhere.

You can calculate your annual percentage rate, or APR, by dividing the rent charge by 2,400.

Mileage allowance

When you lease a car, youre typically allowed to drive a certain number of miles throughout the course of your lease term. Driving your leased car more than the mileage limit usually results in a per-mile fee.

Look closely at the mileage allowance in your lease  which is often 12,000 or 15,000 miles per year. If you anticipate driving more than that, negotiate extra mileage upfront. It may be cheaper to pay for more miles now than pay the per-mile fee later.

FAST FACTS

What leasing terms aren't usually negotiable?

Some factors of a lease typically arent negotiable. The residual value, or value of the car at the end of the lease, is usually set by independent car-value experts.

Another thing that you cant usually negotiate is thelease-acquisition fee. This fee covers the leasing companys costs to set up the leasing transaction.ShowHide


Bottom line

The process of negotiating a car lease can be pretty straightforward. But should you consider leasing a car  or buying one? If the price is right and you like to drive the latest car models, leasing may make financial sense for you.

Even so, you may be better off financially if you purchase a reliable used car and drive it for 10 years or more.Not sure whether to lease or buy? Explore Auto Loan Options


About the author: Lance Cothern is a freelance writer specializing in personal finance. His work has appeared on Business Insider, USA Today.com and his website, MoneyManifesto.com. Lance holds a Bachelor of Business Administration in  Read more.

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