Prev NEXT

How to Lease a Car

How to Negotiate a Car Lease

You can negotiate the cost of the lease just like you can negotiate the cost of a new car.

Keep in mind that when you lease a vehicle, just as when you buy one, its cost is negotiable and based on a variety of factors. The lower the total price, the lower your lease payments will be. To keep costs down, choose a model that has a higher resale value. Consult a used-car pricing guide to see how well a vehicle's value has held up historically, or ask the loan department of your bank or a leasing company to compare new vehicles' residual values.

Many libraries carry the "Residual Percentage Guide" issued monthly by "Automotive Lease Guide." Charts estimate how much each vehicle will be worth after a specified period of months as a percentage of the car's original selling price. This gives a clear picture of which vehicles hold their value best and are therefore prime candidates for leasing. Avoid those with low residual value, because lease terms are certain to be more costly. If a manufacturer is trying to promote a specific model, its lease terms might be even more favorable.

Advertisement

A few years back, manufacturers were subventing leases, absorbing part of the cost by setting artificially high residual values in an attempt to get more vehicles into shoppers' hands. This tactic resulted in substantial financial losses, so automakers nowadays are more wary about residuals and subvention of this sort is less common. However, advertising campaigns often stress the lowest-cost lease deals, some of which are based on tempting interest rates.

Understanding the Fine Print of a Car Lease

Before you sign the lease, make sure that you read and understand everything on the page. Federal regulations require certain facts to be disclosed on lease agreements, including the capitalized cost, interest rate, up-front fees and taxes, any credit provided for used-car trade-ins, the vehicle's residual value and the amount to be depreciated. Most leases contain an acquisition fee, which typically ranges from $250 to $450, and a disposition fee, which likely adds another $300 or $400. A contract may also include a purchase-option fee that allows you to buy the vehicle at the end of the lease for a predetermined price.

Look for a detailed description in the contract of what constitutes "excessive wear and tear," and some indication of what you could be charged for this at the end of the term.

If it's not already included in the lease package, you will be offered "gap insurance" (guaranteed asset protection). This covers the remainder of your lease payments if your leased car is stolen or totaled in a wreck. Even if it's not required, some lessees feel more comfortable if they have a "gap" policy in effect.

Most leases prohibit customizing vehicles with aftermarket accessories such as vinyl tops, exterior trim, and even trailer hitches. Ask before you install such items. The consumer typically pays for sales tax, annual vehicle registration fees and taxes, maintenance, and insurance. All of this should be spelled out in the contract, but find out which portions will be included in your monthly payments and which ones you'll have to pay separately. Some states and municipalities permit dealers to charge specific extra fees, which may not be negotiable. All others can be challenged.

In the final section, you'll find a glossary that will come in handy if you're thinking of leasing a car.