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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 financial calculators and interactive tools that provide objective and original content, by enabling you to conduct research and compare data for free and help you make financial decisions with confidence. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this site come from companies that compensate us. This compensation may impact how and when products are featured on this site, including the order in which they may appear in the listing categories and other categories, unless prohibited by law. Our mortgage or home equity products, as well as other products for home loans. However, this compensation will affect the content we publish or the reviews you read on this site. We do not cover the entire universe of businesses or financial offers that may be open to you.
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5 min read published August 9, 2022
Written by Allison Martin Written by
Allison Martin’s work began over 10 years prior to that as a digital content strategist, and she’s since been published in several leading financial 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 since late 2021. They are passionate about helping readers gain the confidence to manage their finances with clear, well-researched information that breaks down complicated subjects into digestible chunks.
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Are you considering taking a car lease to ride elegantly for a fraction of what you’d pay for an entirely new car? Understanding the process of leasing cars as well as learning the latest business terminology, as well as the ins and outs of lease agreements is a crucial part of finding a bargain. The process of looking around and researching deals and specials offered by various dealers is another valuable step to help negotiate a lease agreement with confidence, ensuring that you get the most suitable lease contract to meet your needs. When you go to a dealership to buy a new car the salesperson is expecting you to negotiate a price that is lower than the price they are asking for. This isn’t usually the case for leases, but there is a step-by-step procedure to negotiate a lease. 1. Learn the jargon It is easy to get overwhelmed with the terminology, particularly if you don’t work in the automotive sector. But you could get yourself an advantage by understanding the jargon dealers use before you go for signing a lease agreement. Here are some common lease-related terms used by dealers. Acquisition fee This fee which is often also known as the assignment fee, or the origination charge, is assessed by the dealer to sign the lease. The amount of this fee can vary from , as per Edmunds. If you don’t have enough money to pay the acquisition fees up front when initiating the lease, it can be rolled into the monthly lease payments. Buyout price A lease buyout usually requires the purchase of a leased car at the end of the contract, or, in certain cases, prior to the deadline for ending. The buyout price is the amount that the dealer will charge you if you decide to do this. Cost reduction cap Cap reduction — or capital cost reduction are all upfront charges that decrease the amount you can finance. It could be a result of trade-in credits as well as rebates, incentives or even a bigger down payment. Disposition fee Disposition fees cover the cost of cleaning the vehicle and getting it in good condition to be sold to someone else when you return it. Gross capitalized cost A vehicle’s sales price, also known as the market value, is the capitalized gross cost. «This can be described as a fancy term for the cost of the vehicle plus any other charges such as balances, taxes, and other charges,» says David Undercoffler, editor in chief of Autolist. Residual value The Residual value represents a projection of the value of the vehicle that it is worth at the time of lease’s expiration. This figure is determined by depreciation and data from the industry. «With the residual value, the seller will estimate the value of the vehicle worth when you turn it over,» says Mike Quincy who is an auto tester and writer for Consumer Reports. «It’s set at the beginning of the lease, and then used to calculate your monthly base payment.» 2. Find deals Google search of «special lease offers» will not get you the most value. Make sure to go further by creating an inventory of the specials you find and then consider expanding your search to other areas of your area. When you’ve compiled an inventory of lease deals on your favorite makes and models, make sure to call each dealership to confirm the details. It is also advisable to be aware of any other deals that aren’t advertised online. 3. Start the negotiations Once you have narrowed down your options, make an appointment at the dealership. Try out the vehicles you are considering and start the negotiations. Some items the dealer may be willing to negotiate include the price of the buyout Do you plan to close the lease? If so, the dealer may be willing to cut you a deal on the buyout price. «This is a good cost to negotiate prior to the start of the lease if you think there’s a chance you’ll decide to purchase the car at the conclusion period,» says Undercoffler. Negotiating the price of the buyout in advance is essential as it’s typically impossible to negotiate this expense once the lease has ended, says Undercoffler. Disposition fee You may be able to receive a reduction on the fee for disposition when you don’t plan to turn the vehicle in or trade it in to another lease once the lease expires. Be sure to negotiate this prior to the start of the lease instead of trying to negotiate it at the end or the end of your lease. Gross capitalized cost Most dealerships will use a low monthly payment as a selling point to attract buyers. But, it is important to attempt to negotiate the car’s selling price that is also the gross capitalized cost. Through negotiation, you could be able to secure an affordable monthly installment without the need to consider extending the lease term. «The capitalized gross cost will affect the monthly payment as well as the final purchase amount of the car. The price is completely negociable,» says Nathan McAlpine who is the proprietor of CarMate which is an auto broker business. In some instances, however like when the dealer offers an exclusive monthly lease deal, this cost may be harder to negotiate. In these instances the lease terms are typically pre-determined, according to Undercoffler. Amount of mileage Most leases limit the number of miles you can drive — usually between 10,000 to 12,000 miles annually. And if you exceed this annual limit the lease will impose the possibility of paying a fine. Beware of being enticed by the lowest mileage allowance when you are a frequent driver. Instead, you should request a larger allowance at a lower cost at the time of establishing the lease to save cash when you hand the car in. «If you know you’ll be driving more than the mileage allowance, it’s a very good idea to negotiate a higher mileage cap for an up-front cost, or not charge at all, rather than paying the per-mile penalty when the lease expires,» says Undercoffler. «Just be aware that if bargain for a higher cap on mileage will decrease the value of the car and the buyout amount since the vehicle will theoretically have more miles.» When you negotiate your mileage allowance, it’s important to understand how many miles you take. «If you purchase extra miles upfront, you won’t get the amount back if don’t take advantage of them,» says Quincy. The money factor acts as the interest rate you pay to lease the vehicle. If you have very good to excellent credit — generally 740 or more- you shouldn’t have difficulty securing the lowest interest rate that the dealership offers. 4. Sign the contract You’ll need to go through the lease agreement before you seal the deal. Lease agreements generally include the following information The down payment that is required If there is one. The price of the lease is also known as the money factor or rent cost. It is the value that will be paid for by the car at the time of the beginning and the expiration of the lease. The annual mileage limitation. A comprehensive fee schedule that includes the costs of wear and tear, extreme damage and other charges that you could incur at the end your lease. The cost of ending the lease in advance. What can’t be negotiated While you may negotiate various fees, there are some limitations. You won’t have much luck negotiating the following: Acquisition fee Dealerships usually won’t waive this administrative fee but will allow you to incorporate it into the lease’s payment, if you require. Residual value isn’t negotiable because it will account for depreciation and information from the industry. Also, lowering the residual value by too much means the dealership could lose money if you decide to buy the vehicle instead of returning it. The bottom line is that it’s possible to find a great bargain on a lease for a car however you must do your homework prior to visiting the dealership. Not only is it crucial to understand the terminology dealerships use as well, but it is also important to compare offers from multiple dealerships, learn what’s negotiable and read the fine print of the lease agreement before sealing the deal. Learn more
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Written by
Allison Martin’s career started over 10 years prior to that as a digital content strategist, and she’s since been published in numerous prestigious financial outlets such as 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 late 2021. They are passionate about helping readers gain confidence to manage their finances by providing concise, well-researched and well-researched content that break down complex topics into manageable bites.
Auto loans editor
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