Leasing a car is a great move if you are looking to jump into the driver’s seat for a few months or years without buying a car. If you’ve decided to lease a car, you need to negotiate the best price to save a few dollars. “But how do I negotiate the best price on a car lease?” You ask.
The key to negotiating a good deal on a car lease is understanding how car leasing works and what is negotiable. We have compiled four tips to help you negotiate a car lease like a pro. Here’s what to do.
Understand how car leasing works.
Car leasing terms are different from car buying terms. With a car lease, you pay a down payment to rent a car for a certain period and also make monthly payments. At the end of the lease term, you can return the vehicle or pay additional money to buy the car. Here’s some important car leasing terminology to know:
- capitalized cost (cap cost): the total cost of the car equivalent to what you’d pay if you were to buy the car
- money factor: the equivalent of the interest rate on a car loan, expressed in decimals
- residual value: the vehicle’s value at the end of the lease term
- mileage: the number of miles you’ll cover per year (Lessors set the miles between 12,000 and 15,000 miles.)
- disposition fees: money you pay the lessor at the end of the lease term to cater for damages or maintenance of the returned vehicle
Know what is negotiable.
Some things in a car lease are not negotiable, like the residual value. You can’t change it. The negotiable things include the cap cost, money factor, and mileage cap. Negotiating the cap cost reduces your monthly payments. You can also get a better interest rate if you talk to the lessor. If you have a good credit score, this should be easy. An ideal money factor is between 3 percent and 5 percent.
Don’t make the mistake of walking into only one dealership and leasing a car without comparing prices. Do your due diligence online and offline. Walk into several dealerships and check out capitalized costs for the models you want on the consumer reports website. Also, compare offers from different lessors. The goal is to get the best deal possible. Use a car lease calculator to compare cars and identify those that suit your budget.
Lastly, be flexible as you hunt for a car. Look at different models, so long as they meet your needs. Sacrificing one feature or two could get you a great deal, especially if you choose a car on offer. Additionally, selecting a car in stock increases your odds of landing a better deal.