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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 choices by providing you with interactive financial calculators and tools, publishing original and objective content. This allows you to conduct research and compare information for free and help you make financial decisions with confidence. Bankrate has agreements with issuers including, 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 website are provided by companies who pay us. This compensation can affect the way and where products appear on this site, including for instance, the sequence in which they appear in the listing categories, except where prohibited by law. Our mortgage or home equity products, as well as other home lending products. 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 vast array of companies or financial deals that may be available to you.
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5 min read published August 09, 2022
Written by Allison Martin Written by
Allison Martin's work started over 10 years prior to that as a digital content strategist. Since then, she's been featured in numerous prestigious financial media outlets, including 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 writing and editing for Bankrate from late 2021. They are dedicated to helping readers gain the confidence to take control of their finances with precise, well-studied information that break down complex topics into manageable bites.
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Are you considering taking a car lease to ride elegantly for only a fraction of the cost you would pay to purchase a new vehicle? Learning about the process of leasing a car, including getting familiar with the industry terminology and the details of lease agreements, is essential to finding a bargain. Shopping around and exploring 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 best lease deal to meet your needs. When you go to an auto dealership to purchase an automobile the salesperson is expecting you to offer below the asking price. This isn't usually the case for lease deals, but it is possible to follow this step-by-step approach to negotiate a car lease. 1. Be aware of the terminology It's easy to become overwhelmed with the language, especially if don't work in the automotive industry. But, you can give yourself some advantage by knowing the jargon dealers use before you go for signing a lease contract. Here are some common lease-related terms used by dealers. Fee for acquisition The acquisition cost, which is often also referred to as the assignment fee or the origination fee is a charge imposed by the dealer to create the lease. This fee can range from $0 to $1000, as per Edmunds. If you don't have the cash to pay the purchase fees upfront at the time of establishing the lease the fee can be rolled into the monthly lease payments. Buyout cost A lease buyout typically requires the purchase of a leased car at the end of the contract, or in some cases before the due date for its expiration. The purchase price is the price the dealer will charge if you opt to do this. Cost reduction cap Cap reduction -also known as capital cost reduction are any up-front charges that decrease the amount you can finance. This could include trade-in credits or incentives, rebates, or even a bigger down payment. Disposition fee Disposition fees pay for the costs associated with cleaning and preparing the vehicle to keep it in tip-top shape to allow someone else to buy it following the return. Gross capitalized cost The vehicle's sales price, also known as the market value is the cost that has been capitalized gross. "This is a fancy word for the price of the vehicle , including any other charges tax, balances and balances," says David Undercoffler the editor-in-chief of Autolist. Residual value The Residual value represents an estimate of what the car will be worth at the time of lease's expiration. The value is calculated by depreciation and industry data. "With the residual value, the seller will estimate the value of the vehicle worth after you trade it over," says Mike Quincy Auto writer and tester of Consumer Reports. "It's placed at the beginning of the lease and used to calculate your monthly base payment." 2. Find deals Google search of "special lease deals" isn't enough to get the best price. Take your search a step higher by creating a list of all the offers you can find, and think about expanding your search to areas outside of the city you live in. Once you have the list of lease offers for your preferred makes and models, make sure to call each dealership to confirm the particulars. Also, you should inquire about any other offers that may not be advertised on the internet. 3. Begin the negotiations once you have narrowed down your list, schedule an appointment at the dealership. Try out the vehicles you're thinking about and then begin the negotiations. Some items the dealer may be willing to discuss include the purchase price. Do you plan to at the end of the lease? If yes, the dealer might be willing to offer you an offer on the purchase price. "This is a great price to negotiate before the start of the lease when you believe there's a decent chance you'll want to buy the car at the conclusion of the lease," says Undercoffler. Negotiating the price of the buyout up front is particularly important as it's typically not possible to negotiate this cost after the lease has ended, says Undercoffler. Disposition fee You can receive a reduction on the fee for disposition if you don't intend to sell the car or trade it in to another lease once the lease agreement ends. It is important to discuss it prior to the start of the lease instead of trying to work around it after the expiration of the lease. Gross capitalized cost Most dealerships will offer the low monthly payments as a way to draw buyers. However, you should always try to negotiate the vehicle's selling price, which is also its gross capitalized cost. By negotiating, you may be able to get an affordable monthly payment without having to resort to extending the lease term. "The capitalized gross amount will affect the monthly payment as well as the final purchase figure of the vehicle. This cost is 100 percent to be negotiated," says Nathan McAlpine the owner of CarMate the auto broker business. However, in certain situations like when dealers are offering a specific monthly lease special it could be difficult to bargain. In such cases the lease conditions are typically pre-determined, according to Undercoffler. The mileage allowance of most leases limit the amount of miles you can drive -- usually between 10,000-12,000 miles per year. And if you exceed the limit each year, there will be an additional fee to be paid. Don't be tricked into accepting an allowance for mileage that is low if you travel a lot. Instead, ask for a greater allowance at a discounted rate when you sign the lease so that you can save cash when you are ready to turn the car in. "If you're certain you'll be using more than the allowance for mileage is a great idea to negotiate a greater cap on your mileage in exchange for an upfront fee, or no fee at all, rather than paying the cost per mile when the lease expires," says Undercoffler. "Just know that if you negotiate a higher mileage cap that it will reduce the value of the vehicle and the amount of buyout, as the car will theoretically have more miles on it." If you're negotiating your mileage allowance, it's important to be aware of the number of miles you take. "If you purchase extra miles in advance but you can't claim your money back if you don't take advantage of them," says Quincy. The money factor is the rate of interest you pay to lease the vehicle. If you've got excellent to excellent credit -- typically 740 or higher -- you shouldn't have a problem securing the lowest interest rate that the dealership can offer. 4. Close the deal It is important to review the entire lease agreement before you seal the deal. Lease agreements usually contain the following information the down payment required, if there is one. The price of the lease which is sometimes referred to as the rent factor or money charge. It is the value that will be paid for by the car at the time of the beginning and the at the end in the term. The annual mileage limitation. A comprehensive fee schedule which includes the cost for wear and tear extreme damage and other charges you could incur at the end your lease. The cost of ending the lease in advance. What cannot be negotiated? Although you are able to negotiate a variety of fees, there are some limitations. You won't be able to negotiate the following fees: Acquisition fee Dealerships typically will not waive this administrative charge however, they can add it to the lease payment should you need to. Residual value: This number is also non-negotiable as it is a way to account for depreciation as well as industry data. Plus, lowering the residual value by too much means the dealership could lose money if you decide to purchase the vehicle rather than selling it. The bottom line is it is possible to negotiate a favorable deal on a car lease however, you should do your research before visiting the dealership. Not only is it crucial to understand the terminology dealers use, but you should also compare offers from multiple dealerships, understand what is negotiable and be sure to read the fine print of the lease agreement before sealing the agreement. Find out more
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Written by
Allison Martin's career started over 10 years ago as a digital media strategist, and she's since been published in numerous prestigious financial publications, including 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 manage their finances by providing concise, well-researched and well-researched content that breaks down complicated topics into digestible chunks.
Auto loans editor
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