How To Negotiate A Car Lease Agreement

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Negotiating a car lease isn’t any more difficult than negotiating the purchase price of a vehicle, however there are more details to negotiate that you won’t have to touch on when buying a car outright such as mileage and cost per mile. 

If you haven’t negotiated a lease before, you definitely want to do your research before heading into the dealership to strike a deal with a manufacturer. 

Car Lease Areas Of Negotiation

You can’t negotiate on everything with a car lease. Knowing what you can and cannot finagle is a great way to be prepared for negotiation. Here are the most common items of a car lease that you can ask for personalization on. 

Capitalized Cost

The capitalized cost is essentially the cost of the vehicle. It is a great place to start negotiations because it impacts the monthly payment amount more than anything else. You’ll want to know how much the vehicle actually cost the dealership to purchase so that you have a better idea of what the potential capitalized cost may be. 

You may have more room to negotiate the cap cost with a down payment or a trade in vehicle. 

Leasing Terms You Won’t Negotiate

It is important to know what leasing terms you can’t negotiate as well. For most car leases you will not be able to talk your way into a better buyout price at the end of your lease, though it doesn’t hurt to ask. The official terminology is the residual value of the vehicle. You also won’t be able to reduce the amount of the lease acquisition fee which is how much the lessor will charge you to process the lease and get set up. 

How To Get The Best Deal On A Leased Vehicle

Step 1: Do Your Research On Current Prices And Any Deals Local Dealerships Are Running

Make a list of the models of vehicles you are interested in and be sure to know what the current pricing is on these vehicles. Check out what specials and sales are being advertised by the dealership as a basis for where to start on your negotiations. Don’t let the dealership act like the sale they are running is something they are doing you a favor on. That is your jumping off point. 

Don’t just look at the cost of leasing these cars, you want to know how much the cars are selling for in the exact make model and year that you are hoping to lease. If you can negotiate down the purchase price of the vehicle it could save you thousands of dollars in depreciation expenses over the life of your lease. 

Step 2: Look Like This Isn’t Your First Rodeo By Knowing The Terminology

Here is a list of common terms that you should know and understand before ever stepping foot in a dealership. 

  • Lessor – this is the company leasing you the vehicle. Know that this isn’t the dealership but an outside finance company.
  •  Lessee- This is you, the person leasing the vehicle. When you hear the term lessee in reviewing the contract this is referring to your obligations. 
  • Gross Capital Cost- This is essentially the total cost of the vehicle. This includes the value of the vehicle as well as any services and fees that the lessor has tacked onto this price. 
  • Residual Value- this is the amount that your lessor anticipates your vehicle will be worth at the time that your lease is up. It takes into account the mileage limit you have agreed to and the length of the lease term (ie how old the car will be when they try to sell it at auction). The residual value estimation will determine how much your monthly payments come out to being as well as the buyout amount of the end of your lease. 
  • Buyout Amount- at the end of a lease you have the option to buy your car from the lessor. The purchase price will be set at the beginning of the lease and won’t be up for negotiation after the lease has ended. In some cases the estimation of residual value is inaccurate, so when deciding to buy out your car you should check to see what the actual value of the vehicle is. In some cases you can flip the car for a profit though this doesn’t happen often. 
  • Rent Charge- this is similar to the interest rate when you finance a vehicle. This is the amount added to your monthly payment as a rental fee. 
  • Disposition Fee- this is how much it is going to cost you to return the vehicle. The reasoning behind this fee is that the vehicle will have to be serviced and restored before making its way to another customer. 
  • Closed end lease- We discussed this briefly in the residual value and buyout amount definitions. A closed end lease means that you predetermine how much the vehicle is going to be worth when the lease is up. This means if the vehicle is worth less (due to market value, not damages that you caused) you will not be responsible for covering the further depreciation of the car that was unforeseen by the lessor. 

Step 3: Don’t Disclose Your Level Of Expertise

Don’t tell the dealership personnel that this is your first time leasing a car else you may open yourself up to be taken advantage of. 

Step 4: Shop Multiple Dealerships

Don’t just one stop shop when you are leasing a vehicle. You wouldn’t do this when buying a car, you would shop around for the best deals. It is the same process when it comes to leasing a vehicle. Don’t take the first offer made to you. 

Step 5: Don’t Have Your Heart Set On Just One Model

Some models of vehicles are in higher demand than others. Basic economics will tell you that you’ll get the best price on the vehicle with the lowest demand. In some cases car dealerships will have similar models, such as a slightly smaller SUV for instance that just isn’t selling as well at that time for whatever reason. 

Be open to signing a lease on a car model that you may not have anticipated to see the best value.

We hope this article has answered all of your questions regarding pre vehicle leasing negotiations and that you feel more prepared to handle such an occurrence now and in the future. Consider protecting your vehicle with an extended warranty plan from Protect My Car. In addition to warranties, Protect My Car also offers insurance and maintenance plans and can negotiate the best prices on repairs with mechanics. 

Protect My Car provides consumers with extended auto warranty plans that have real coverage for vehicles that are no longer covered by their manufacturer’s warranty. Whether your vehicle was purchased new or used, if your manufacturer’s warranty is about to expire, or has already expired, an extended auto warranty plan can save you thousands of dollars in repair bills. Since the majority of vehicle repairs happen 3-5 years after the original purchase date, which many times is outside of the manufacturer’s warranty coverage period, leaving you responsible for paying the full repair bill. However, when you purchase a policy from Protect My Car, you could pay as little as $100.00 for your major repairs. That’s a lot of savings!

Resources:

https://www.autotrader.com/car-shopping/leasing-a-car-can-you-negotiate-the-price-242601
https://www.experian.com/blogs/ask-experian/how-to-negotiate-a-car-lease/
https://www.carfax.ca/resource-centre/articles/determining-residual-value-should-i-buy-out-my-lease#:~:text=The%20residual%20value%20of%20a,once%20your%20lease%20is%20up.
https://www.caranddriver.com/shopping-advice/a15595299/how-to-negotiate-your-next-new-car-lease-like-a-pro/
https://cars.usnews.com/cars-trucks/how-to-negotiate-a-car-lease
http://www.realcartips.com/leasing/0056-best-time-to-lease-a-car.shtml
https://www.autolist.com/guides/how-to-negotiate-car-lease

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