The trick to negotiating a lease is to fully understand what costs are involved. Some dealers have strong lease programs and won't budge on the total amount, but fees and charges can be waived that might add up to hundred of dollars. Other car makers may allow the consumer to bid on the final value of the vehicle to make leasing more appealing.
Leasing is more expensive than buying, but that is no reason to throw away money. Learning these simple concepts is the best way to secure a great deal.
Just like buying a car, it pays to go online and get offers from many different dealerships. Some may have special lease programs in place to reduce the cost of acquisition to just a few hundred dollars. In the face of competition, a dealer may lower or even waive the down payment. The disposition fee and mileage allowance may become much more negotiable.
While the dealer down the street might be the logical place to start shopping, there are other options. Leasing agencies or brokers might offer better terms. Some banks and credit unions may offer car leases as part of their services.
The total amount of a lease is determined by the difference between the initial price of the car out the door, called the "transaction price" or "capitalization cost," and the value of the car at the end of the term, called the "residual value."
The residual value is a very important number. The closer this number is to the transaction price, the lower the cost of the lease. Some manufacturers will artificially inflate the residual value to make leasing more attractive.
Shopping for a make or model with a historically high resale value will help to keep costs down. Used car pricing guides are readily available online, and the auto loan department of a bank or credit union should have several suggestions on hand.
The "money factor" is essentially the interest rate, and is the fee the dealer charges for the use of the vehicle. It's expressed as a fractional number rather than a percentage, such as 0.00123. To find out the equivalent APR, multiply the money factor by 2400. In this case, the APR would be 3%.
The lower this number, the more money will be saved.
Leases restrict the amount of miles a car can be driven annually in order to more closely estimate what the car will be worth at the end of the term. A usual allotment is 10,000 miles per year, and for every mile driven over that a surcharge of $0.20 is added to the amount due when the car is handed back.
This surcharge can quickly add hundreds or thousands of dollars to the cost of a lease, but is often negotiable. The best strategy is to increase the allotment to at least 15,000 miles before trying to get the surcharge reduced.
The amount due at the end of the lease is based upon "normal wear and tear" as defined by the dealer. It is imperative to clearly outline what is and isn't covered by that term. Horror stories exist of charges for tires, brake jobs, windshield wipers, and more at the end of the term.
The disposition fee covers the cost of the dealer preparing it for its next sale, and can often be waived in the initial negotiation.
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