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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 smarter financial decisions by offering interactive tools and financial calculators that provide objective and original content, by enabling you to conduct research and compare data for free to help you make sound financial decisions. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies who pay us. This compensation can affect the way and where products appear on this website, for example the order in which they appear in the listing categories in the event that they are not permitted by law. This applies to our mortgage or home equity products, as well as other products for home loans. However, this compensation will have no impact on the information we publish, or the reviews that you see on this site. We do not contain the universe of companies or financial offers that may be available 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 prior to that as a digital content strategist. She’s been featured in numerous prestigious financial publications such as The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping readers gain the confidence to take control of their finances through providing precise, well-studied information that break down complex subjects into digestible chunks.
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Are you considering a vehicle lease to drive around with style at less than what you’d spend to buy a new vehicle? Learning about the process of leasing cars and learning the latest business terminology, as well as the specifics of lease agreements, is essential to getting a great deal. Looking around and examining the deals and specials offered by various dealers is another valuable step to help negotiate a car lease with confidence and ensure that you receive the most suitable lease contract for your requirements. When you go to a dealership to buy an automobile the salesperson is expecting you to make an offer lower than the asking price. However, this isn’t often the case with lease deals, but it is possible to follow this step-by step method to negotiate a car lease. 1. Be aware of the terminology It’s easy to become overwhelmed by the terminology, particularly if you don’t work in the automotive business. But, you can give yourself an advantage by understanding the terms used by dealers prior to when you sit down for signing a lease contract. Here are some common lease-related terms used by dealers. Acquisition fee The acquisition fee, which is often called the assignment fee, or the origination fee is a charge imposed by the dealer to sign the lease. This cost can range from $0 to $1000, as per Edmunds. If you don’t have enough funds to pay for the purchase fees upfront when you sign the lease contract you can roll it into the monthly lease payments. Buyout cost A lease buyout usually involves purchasing a leased vehicle at the conclusion of the lease, or, in certain cases, prior to the due date for its expiration. The price for buying out is the amount the dealer would charge, should you opt to take this step. Reduced cost of capCap cost -also known as capital cost reduction — are any up-front 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 fees Disposition fees are the costs associated with cleaning and preparing the vehicle to keep it in tip-top shape to allow someone else to buy it after you return it. Gross capitalized cost The car’s sale price, also referred to in the form of the market price is the gross capitalized cost. “This may be a fancy name for the price of the car, plus any other charges, balances, and taxes,” says David Undercoffler the editor-in-chief of Autolist. Residual value Residual value is an estimate of the value of the vehicle that it is worth at the expiration of the lease. This figure is determined by depreciation as well as industry information. “With the residual figure, the seller estimates the value of the vehicle worth when you turn it in,” says Mike Quincy who is an auto tester and writer of Consumer Reports. “It’s established at the start of the lease and used in calculating your base monthly payment.” 2. Look for deals Google search of “special lease offers” isn’t enough to find the best deal. Make sure to go further by creating a list of all the offers you can find, and then consider expanding your search to regions outside of the city you live in. Once you have a list of lease deals for your preferred makes and models, make sure to call each dealership to confirm the specifics. It is also advisable to ask about any other deals that may not be advertised online. 3. Begin negotiations when you’ve narrowed your list, plan an appointment with the dealer. Take a test drive of the cars you’re thinking about and then begin the negotiations. Some items the dealer may be willing to discuss include: Buyout price Do you plan to take the lease out at the end of the lease? If so, the dealer may be willing to cut you an offer on the purchase price. “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 vehicle at the end term,” says Undercoffler. Negotiating the buyout price in advance is essential since it’s usually impossible to negotiate this cost after the lease is over, according to Undercoffler. Disposition fee You can receive a reduction on the disposal fee in the event that you do not intend to trade in the vehicle or swap it out to a new lease after the lease agreement ends. It is important to discuss it in the beginning, rather than trying to work around it at the end of the lease. Gross capitalized cost Most dealerships will use low monthly payments as a selling point to entice buyers. But, it is important to consider negotiating the vehicle’s selling price as well as its capitalized gross cost. Through negotiation, you could be able to get an affordable monthly installment without needing to resort to extension of the lease. “The gross capitalized cost can affect the monthly payments and the final buyout value of the vehicle. The price is completely negotiable,” says Nathan McAlpine the owner of CarMate, an auto broker company. However, in certain situations, such as when a dealer is offering an exclusive monthly lease deal the cost could be harder 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 this annual limit, there will be an additional fee to be paid. Beware of being enticed by the lowest mileage allowance when you travel a lot. Instead, you should request a larger allowance at a discounted rate at the time of establishing the lease so that you can save money when you turn the vehicle in. “If you’re certain you’ll be driving more than the allowance for mileage is a great option to negotiate a higher limit on mileage for a one-time fee, or no fee in the first place, instead of paying the fee per mile after the lease expires,” says Undercoffler. “Just be aware that if bargain for a higher cap on mileage that it will reduce the value of the vehicle and the buyout amount since the vehicle will theoretically have more miles.” When you negotiate your allowance for mileage, you need to understand how many miles you take. “If you are charged for additional miles upfront but you can’t claim your money back if you don’t use them,” says Quincy. Money factor The cash factor determines the interest rate you pay for leasing the car. If you’ve got excellent credit — generally 740 or more- you shouldn’t have difficulty securing the lowest interest rate the dealership can offer. 4. Seal the deal You’ll want to go through the lease agreement prior to signing the deal. Lease agreements generally include the following details: The required down payment the amount of down payment, if there is one. The cost of the lease, also known as the rent factor or money cost. Value of the vehicle at the time of the beginning and the expiration period of lease. The annual mileage limitation. A detailed fee schedule which includes the costs for wear and tear excessive damage and other charges that you might incur at the conclusion period. Costs to terminate the lease early. What cannot be negotiated? Although you may negotiate various fees, there are some limitations. You won’t be able to negotiate the following fees: Acquisition fee Dealerships typically won’t waive this administrative fee however, they can incorporate it into your lease payment if needed. Residual value is also non-negotiable as it will account for depreciation and industry data. Additionally, reducing the residual value too far could cause the dealer to be unable to recover the cost if you decide to purchase the vehicle rather than returning it. The bottom line It is possible to get a good deal on a car lease however, you should do your research before visiting the dealership. It’s not just crucial to understand the terminology dealers employ and the jargon they use, but also examine offers from various dealerships, understand what is negotiable and read the fine print of the lease agreement before sealing the deal. Find out more
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Written by
Allison Martin’s work began over 10 years prior to that as a digital content strategist. She’s been published in numerous prestigious financial media outlets including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain confidence to manage their finances through providing clear, well-researched information that breaks down otherwise complex topics into digestible chunks.
Auto loans editor
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