When someone leases a car, typically they can make a lower monthly payment than if they’d purchased the vehicle with a loan. That’s a key reason why leasing can be so appealing for many consumers.
The lease lasts for a predetermined number of months and miles. At the end of the time period, the vehicle is usually returned to the dealership. Alternatively, if there’s a purchase option, the person leasing it might decide to buy the vehicle outright.
If you decide to lease, you’ll have to negotiate with a dealer to get the vehicle and lease terms you want. Below we provide eight tips on how to negotiate a car lease agreement.
Key Points
• Before negotiating your car lease, research the car’s market value, lease rates, and dealer incentives to have a strong foundation for your discussions.
• The money factor, similar to an interest rate, significantly affects your lease payments. Try to negotiate a lower money factor to reduce costs.
• Dealers often offer incentives like cash back or reduced interest rates. Ask about all available incentives and how they can be applied to your lease.
• A higher residual value (the car’s estimated worth at the end of the lease) can lower your monthly payments. Push for a realistic but favorable residual value.
• Don’t just focus on monthly payments; consider the total cost of the lease, including down payments, fees, and mileage limits, to ensure you get the best deal overall.
Can You Negotiate a Car Lease?
Yes, you can negotiate a car lease. You can negotiate the down payment, rent charge, and acquisition fees. Negotiating over mileage on lease contracts is another area you may negotiate, among other areas open to negotiation.
Are There Reasons Not to Negotiate a Car Lease?
You are not required to negotiate a car lease, and leasing companies have no obligation to entertain any negotiations.
While negotiating a car lease can save money, there are reasons to avoid it. Some dealerships have fixed lease terms, leaving little room for negotiation. Additionally, attempting to negotiate may not yield significant savings if the lease is already competitive. Researching market rates ensures you’re getting a fair deal.
Recommended: Leasing vs. Buying a Car: What’s Right for You?
How Do You Negotiate a Car Lease?
How to negotiate a car lease is up to you, but the main thing is having a dialogue and asking whether the finance company can offer better terms on the lease. Understanding the leasing process can help you negotiate lease terms that are right for you.
What Can and Can’t You Negotiate?
Below we highlight areas you can and cannot negotiate when negotiating auto leases:
What You Can Negotiate
Here are elements you may negotiate with a car lease:
• Acquisition fee
• Disposition fee
• Down payment
• Early termination fees
• Gross capitalized cost
• Mileage allowance
• Mileage fee or charge
• Rent charges
What You Can’t Negotiate
You may not be able to negotiate the residual value in the leasing contract. The residual value is what the leasing company estimates the car will be worth at the end of the leasing term.
Another area you may not be able to negotiate is the penalty of what happens in the event of default. Failing to make required lease payments when due can lead to car repossession.
8 Tips for Negotiating Auto Leases
Here are eight tips for negotiating a car lease:
1. Know the Terminology
Car leasing lingo has some different terms than the language used in buying or selling a car. For example, instead of a buyer and seller, there’s a lessor (the company leasing the vehicle) and a lessee (the person taking out the lease).
Typically, lessees prefer a closed-end lease, meaning one in which the two parties agree (from the start of the contract) on an estimate of what the future value of the vehicle will be. So, if the lease ends and the lessee returns the vehicle, they won’t owe more money because of depreciation, even if the vehicle is worth less than estimated in the original contract.
Residual value/future value is an estimate given by the lessor to share how well a car is likely to maintain its value during the lease period. A short-term car lease can be anywhere from 12 to 24 months, while a long-term lease can be up to 60 months.
Other terms you will likely hear include:
• Lease acquisition fee: This is an upfront fee that covers the cost of checking your credit scores, setting up the lease, and so forth.
• Lease disposition fees: These fees may be charged if you return the vehicle, and it’s intended to cover the costs of getting the vehicle in shape for resale.
• Rent charge: This is similar to the interest paid on a car loan. The rent charge is part of the monthly fee you pay as a privilege of driving the leased vehicle.
If you’re ever uncertain about what a term means, ask or investigate. You can’t negotiate without understanding the terms of the discussion.
2. Read the Fine Print
Lease terms can vary by dealership and by contract, so it’s important to be clear about what you’re agreeing to in yours.
Overall, a lease resembles a car rental but for a longer amount of time — typically two to four years. You’ll pay to use that car for the agreed-upon time period and then, at the end, either buy or return the vehicle.
A typical lease allows you to put 10,000 to 15,000 miles on the vehicle each year. If you go beyond those limits, there is often a per-mile fee charged.
All of that information should be listed in the agreement, along with the car’s value — both the current one and its end-of-lease projections — the rent charge, amount of money that needs to be put down, penalties for late payments, and other fees, including for excessive wear and tear or damage. Your contract may also feature early termination fees if you get out of your car lease early.
Recommended: What Is a Lease Disposition?
3. Ask About the Cap Cost
“Cap cost” is short for the vehicle’s “capitalized cost” and, as the lessee, you’d want this number to be as small as possible. Why? Because it’s the price of the vehicle.
With a leasing deal, when a consumer negotiates for a lower payment, the dealer may agree. But the catch is that, rather than lowering the price, they would probably extend the payment period, which doesn’t necessarily benefit the lessee.
Here’s an example. Let’s say a dealer offers a 36-month lease with a monthly payment of $400 (36 x $400 = $14,400). You want to reduce the payment a bit and so the dealership lowers it to $375. But the lease is now 42 months long (42 x $375 = $15,750).
So, rather than negotiating the payment, negotiate to lower the price of the vehicle. To reduce this figure, you may be able to apply to put money toward the lease or trade in another vehicle. Doing so is called a “capital cost reduction.”
4. Leverage Interest Rates/APRs From Other Dealers
Search online for the make and model you want and contact dealerships to get specifics about rent charges, APRs, and special offers. Then, pick the dealership where you want to start negotiations. During a car lease negotiation, don’t hesitate to bring up what you’ve learned about other dealerships and what they’re offering.
Some dealers may tell you that rent charges aren’t negotiable, but others might be more willing. It’s important to know what dealerships, in general, are offering, and make sure that the contract you sign is reasonable.
5. Be Clear on Mileage
Take an honest look at your mileage needs and compare that to what’s offered in the lease. If you don’t put many miles on your car, then you could ask for a lower monthly payment in exchange for a lower annual mileage limit. If, on the other hand, you put plenty of miles on the odometer, you can request a higher limit without an extra charge. Dealers don’t have to agree, but that’s all part of the negotiating process.
6. Look at the Manufacture Date
The manufacture date is different from the model year. The older the manufacture date, the longer the vehicle has been sitting on a lot somewhere. For example, a car can be a 2023 model but have been manufactured in 2022. To get this information, look at the vehicle identification number or VIN.
The tenth digit will indicate the date of manufacture with different manufacturers using different systems to indicate what that means.
7. Let the Lessor Know if You Plan to Buy the Car
If you plan to purchase the vehicle once the lease period expires (known as a lease buyout), you may be able to negotiate the buyout price, lowering it beyond what the market value is expected to be. That will save you money when you’re refinancing the vehicle in your own name. If you’re not ready to buy the vehicle, extending a lease on a car may be an option if the leasing company agrees to an extension.
8. Leverage Your Trade-In Vehicle
When determining how to negotiate your car lease, consider the vehicle that you may turn in as part of the deal. The dealer will let you know the value of your trade-in (a number you can negotiate, so come armed with info from Kelley Blue Book or another trusted industry source) and those funds can be applied to the lease to reduce your monthly payments.
Lowering Your Car Payments With Auto Loan Refinancing
Refinancing your auto loan may provide you with a lower monthly payment. Can you refinance your car lease? Yes, you can refinance a car lease by taking out a lease buyout loan. This gives you ownership of the vehicle and requires that you make regular loan payments rather than lease payments.
Car leases typically include lower monthly payments than auto loan refinancing. One of the downsides to having a car lease is you pay monthly fees without receiving any equity in return. Refinancing a car lease promotes ownership.
Recommended: Refinancing a Car Loan: What to Consider
Auto Loan Refinancing Rates
Whether you have a car loan or lease, you may qualify for auto refinancing. Auto refinancing promotes car ownership and can provide you with a lower monthly payment.
If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.
FAQ
Can car lease prices be negotiated?
Yes, car lease prices can often be negotiated. You can negotiate factors like the vehicle’s purchase price (capitalized cost), trade-in value, and lease terms. Additionally, fees, mileage limits, and monthly payments may be adjusted. Preparing research and understanding the car’s market value strengthens your bargaining position during negotiations.
Can you negotiate a down payment on a car lease?
Yes, you can negotiate a down payment on a car lease. The down payment, or capitalized cost reduction, lowers your monthly payments. However, it’s not mandatory, and some lessors may waive it. Negotiating effectively requires understanding the lease terms and comparing offers from different dealerships to secure the best deal.
How do you negotiate for a good deal on a car lease?
To negotiate a good car lease deal, research the car’s market value and residual value. Negotiate the capitalized cost, focusing on lowering the selling price. Check the interest rate and compare offers. Understand lease terms, including mileage limits, and avoid unnecessary add-ons to keep costs manageable.
Photo credit: iStock/Milan Markovic
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