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How to negotiate a car lease Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by offering you interactive tools and financial calculators that provide objective and original content. We also allow you to conduct research and compare information at no cost to help you make informed financial decisions. Bankrate has partnerships with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this website are provided by companies that compensate us. This compensation may impact how and when products are featured on the site, such as for instance, the order in which they may appear within the listing categories, except where prohibited by law. Our mortgage or home equity products, as well as other home lending products. This compensation, however, does not influence the content we publish or the reviews you read on this site. We do not include the vast array of companies or financial offerings that could be available to you.
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5 minutes read. Published on August 9, 2022.
Written by Allison Martin Written by
Allison Martin's work began over 10 years ago as a digital content strategist. She's been published in several leading 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 since the end of 2021. They are dedicated to helping readers gain the confidence to take control of their finances by providing clear, well-researched information that breaks down otherwise complex topics into manageable bites.
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Are you thinking about a car lease to ride in style for only a fraction of the cost you'd spend to buy a new vehicle? Learning about the process of leasing a car, including learning the latest terms used in the industry and the details of lease agreements is essential to landing a good deal. Shopping around and exploring the offers and discounts offered by multiple dealers is another great way to help you negotiate a car lease with confidence to ensure you get the best lease deal for your needs. If you visit an auto dealership to purchase a new car the salesperson will expect you to make an offer lower than the price they are asking for. It's not always the case with lease deals, but there is a step-by-step procedure to negotiate a lease. 1. Learn the jargon easy to become overwhelmed by the language, especially if are not in the auto industry. However you could gain an advantage by understanding the terms dealers use prior to you sit down to sign a lease agreement. Here are some common lease-related terms that dealers use. Acquisition fee The acquisition fee, which is often also known as the assignment fee or even the origination fee is a charge imposed by the dealer in order to establish the lease. The amount of this fee can vary from $0 to $1000, according to Edmunds. If you don't have the money to pay the purchase fees upfront at the time of establishing the lease, it can be rolled into your monthly lease payment. Price for buyout A lease buyout generally requires the purchase of a leased car at the conclusion of the lease, or in some cases prior to the due date for its expiration. The price for buying out is the amount the dealer would charge, should you decide to take this step. Cost reduction cap Cap reduction -also known as capital cost reduction are all upfront payments that lower the amount you finance. This could include trade-in credits, incentives, rebate amounts and even making a larger down payment. Disposition fees Disposition fees are the expenses associated with cleaning your vehicle and keeping it in tip-top shape to allow someone else to buy it when you return it. Gross capitalized cost The vehicle's sales price, also known by the term "market value is the cost that has been capitalized gross. "This may be a fancy word for the price of the vehicle , including any other fees such as balances, taxes, and other charges," says David Undercoffler, editor in chief of Autolist. Residual value value is a projection of what the vehicle will be worth at expiration of the lease. This figure is determined 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 tester and writer of Consumer Reports. "It's established at the start of the lease and used to calculate your monthly base payment." 2. Look for deals Google search for "special lease deals" isn't enough to get the best deal. Go higher by creating an outline of all the deals you come across and consider broadening your search to areas outside of your area. When you've compiled a list of lease deals on your favorite makes and models, contact each dealer to confirm the specifics. You should also be aware of any other deals that may not be advertised on the internet. 3. Begin negotiations when you have narrowed down your list, plan an appointment with the dealer. Test drive the vehicles you're considering and begin the discussions. Some items the dealer may be willing to negotiate include the purchase price. Do you intend to purchase the vehicle take the lease out at the end of the lease? If so, the dealership may be willing to cut you a deal on the buyout price. "This is a good cost to negotiate at the beginning of the lease when you believe there's a chance you'll decide to purchase the car at the end term," says Undercoffler. Negotiating the price of the buyout up front is particularly important as it's typically impossible to negotiate this cost after a lease ends, says Undercoffler. Disposition fee You may be able to get a break on the disposition fee if you don't intend to turn the vehicle in or exchange it to a new lease after the lease contract expires. Make sure to negotiate it at the start instead of trying to work around it after the expiration of the lease. Gross capitalized cost is often the reason that dealerships will offer a low monthly payment as a selling point to entice buyers. But, it is important to try to negotiate the vehicle's cost of sale, which is also its capitalized gross cost. By negotiating, you may be able to get an affordable monthly installment without the need to consider extending the lease term. "The gross capitalized cost will impact the monthly installment and also the final buyout figure of the vehicle. This cost is 100 percent negociable," says Nathan McAlpine the owner of CarMate which is an auto broker business. However, in certain situations, such as when a dealer is offering the lease at a particular monthly rate, this cost may be more difficult to bargain. In such instances the lease conditions are typically pre-determined, according to Undercoffler. Mileage allowance Most leases limit the number of miles you are allowed to drive -- often to 10,000 to 12,000 miles annually. And if you exceed this annual limit, there will be an additional fee to be paid. Don't be tricked into accepting the lowest mileage allowance when you are a frequent driver. Instead, you should request a larger allowance at a reduced rate when you sign the lease so that you can save cash when you hand the car in. "If you know you'll be driving more than the allowance for mileage, it's a very good option to negotiate a higher mileage cap for an up-front cost, or not charge in the first place, instead of getting hit with the per-mile penalty when the lease expires," says Undercoffler. "Just be aware that if you bargain for a higher cap on mileage that it will reduce the residual value of the vehicle as well as the buyout amount, since it will theoretically put more miles on it." If you're negotiating your mileage allowance, it's essential to know about how many miles per year you typically drive. "If you are charged for additional miles in advance, you won't get the amount back if do not use them," says Quincy. Money factor The cash factor determines the rate of interest you pay for leasing the car. If you have very good credit -- typically 740 or greateryou should not have a problem securing the lowest interest rate the dealership offers. 4. Close the deal It is important to go through the lease agreement prior to signing the contract. Lease agreements typically contain the following details: The required down payment If there is one. The cost of the lease which is sometimes referred to as the money factor or rent charge. Value of the car at the start and end of the lease. The annual mileage limitation. A comprehensive fee schedule that includes the cost for wear and tear extreme damage, and any other costs you could incur at the end your lease. The cost to end the lease in advance. What cannot be negotiated? Although you can negotiate several fees, there are some limitations. However, you're not likely to get much success negotiating the following: Acquisition fee Dealerships usually do not waive the administrative fee however they will let you roll it into the lease payment should you need to. Residual value: This number is not negotiable since it is a way to account for depreciation as well as information from the industry. Also, lowering the residual value by too significantly means that the dealer could lose money if you decide to buy the vehicle instead of selling it. The bottom line It is possible to negotiate a favorable deal on a car lease however you must do your homework before visiting the dealership. It's not just essential to know the terms dealers employ as well, but it is also important to evaluate offers from different dealerships, learn what's negotiable and be sure to read the fine print on the lease contract prior to signing the deal. Learn more
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Written by
Allison Martin's career began more than 10 years prior to that as a digital content strategist. She's been published 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 late 2021. They are dedicated to helping readers gain the confidence to control their finances by providing concise, well-researched and well-researched content that breaks down complicated topics into manageable bites.
Auto loans editor
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