Are you considering a car lease to ride in style for a fraction of what you would pay to buy the vehicle? It is pertinent to negotiate with the dealership before you find the perfect ride and sign on the dotted line. Take some time to learn the lingo of car dealers, shop around and understand what can and can’t be negotiated to get the best deal.
4 steps to negotiating a car lease
When you walk into a dealership to buy a new car, the car salesperson expects you to offer below the asking price. This isn’t always the case with lease deals, but you can follow this step-by-step approach to negotiate a car lease.
1. Learn the jargon
It is easy to get overwhelmed with the language of lease agreements, especially if you don’t work in the automotive industry. However, you can give yourself a slight advantage by learning the jargon dealers use before you are sitting down to sign a lease contract.
Here are some common lease-related terms used by dealers:
- Acquisition fee: The fee assessed by the dealer to create the lease, which can range from $395 to $895, according to Edmunds.
- Buyout price: The amount the dealer would charge you if you purchased the vehicle once the lease term ends.
- Cap cost reduction: Any costs — like trade-in credits, rebate amounts and payments — that lower the amount you finance.
- Disposition fee: Covers the costs of cleaning the vehicle and getting it in tip-top shape for someone else to purchase after you return it.
- Gross capitalized cost: The vehicle’s sales price, also known as the market value.
- Residual value: A projection of what the vehicle will be worth when the lease ends, determined by depreciation and industry data.
2. Research deals
A quick Google search of “special lease offers” isn’t enough to get the best deal. Take your search a step further by making a list of all the specials you find and consider broadening your search to areas outside of your city.
Once you have a list of lease deals on your favorite makes and models, call each dealership to confirm the details. You should also inquire about any other offers that may not be advertised online.
3. Start the negotiations
Once you pare down your list, schedule a visit to the dealership. Test drive the vehicles you are considering and start the negotiations. Some items the dealer may be willing to negotiate include:
- Buyout price: Do you plan to purchase the vehicle at the end of the lease? If so, the dealership may be willing to cut you a deal on the buyout price.
- Disposition fee: You could also get a break on the disposition fee if you don’t intend to turn the vehicle in or swap it out for another lease when the lease agreement ends.
- Gross capitalized cost: Most dealerships use a low monthly payment as a selling point to entice customers. However, you should negotiate the vehicle’s sales price, as you could get an affordable monthly payment without having to extend the lease term.
- Mileage allowance: Don’t be tricked into accepting a low mileage allowance if you drive a lot. Instead, request a higher allowance at a discounted rate to save yourself money when you turn the vehicle in.
- Money factor: If you have good or excellent credit, you shouldn’t have a problem securing the lowest interest rate the dealership offers.
4. Seal the deal
You’ll want to review the entire lease agreement before you seal the deal. Lease agreements generally include the following information:
- The required down payment, if any.
- The cost of the lease, also known as the money factor or rent charge.
- The value of the car at the start and end of the lease.
- The annual mileage limit.
- A detailed fee schedule that includes the cost of wear and tear, excessive damage and other charges you could incur at the end of the lease.
- The cost to end the lease early.
What can’t be negotiated
While you can negotiate several fees, there are limits. Unfortunately, you won’t have much luck negotiating the following:
- Acquisition fee: Dealerships generally won’t waive this administrative fee but will allow you to roll it into your lease payment if needed.
- Residual value: This figure is also non-negotiable as it accounts for depreciation and industry data. Plus, lowering the residual value too much means the dealership could lose money if you decide to purchase the car instead of turning it in.
The bottom line
You can get an amazing deal on a car lease, but you’ll want to do a little legwork before visiting the dealership to select a new ride. Not only should you learn the jargon dealers use, but compare offers from multiple dealerships, learn what’s negotiable and read the fine print on the lease agreement before you seal the deal.
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