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How to negotiate a car lease

by Dr Prem Community Writer

Leasing cars is a great idea as you can lease the latest cars with the latest technology and the last word in luxury. However, if this is the first time you are going to lease a car, it might be quite confusing for you. Here we will briefly tell you about the particular leasing terms you should know about, and what can be negotiated and more. Read on:

How to negotiate a car lease 

Know the lingo

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Whether it is hybrid car leasing deals you are looking to negotiate or other, you should have a grip on the typical terminology that is used in the process, which is different from the terms used for vehicle loans and purchases. Some of the most common terms are:

  • Lessee/Lessor: In any leasing contract, you, i.e. the person who is leasing the car is called the lessee and the company leasing the car is the lessor.
  • Gross capitalized cost: This is the car’s price, such as the price of an electric Porsche 964 Targa, along with the fee as well as services.
  • Residual value: It is the future value of the leased car, which is decided by the leasing company, determined by how well the car retains its value over the time period of the lease.
  • Rent charge: This is similar to the interest on a car loan.
  • Disposition fee: This is the money you have to pay if you return the car, meant for offsetting the costs of reconditioning the car for sale.
  • Closed-end lease: In this type of lease, the future value of the car is agreed upon in the beginning. This could be a lease type favoring you, as if the car’s worth is less when the car is returned, then you don’t have to pay more due to the depreciation.
  • Capitalized cost: Different from the MSRP, and is the price you can negotiate.
  • Cap Cost Reduction: This usually includes the value of trade-in and special deals on lease.
  • Money factor: This is the rate of interest on the funds which are used to finance the lease. YOu can use this to compare different lease deals.
  • Buyout price: This is the price of the car, if you want to buy after your lease ends, and may not be the same as residual price.
  • Acquisition fee: This is the fees for preparing the lease documents.
  • Due-at-signing: You have to pay the down payment, first month payment and the security amount, if there is any at the initiation of the lease. This is usually without the tax or fees. 

What can you negotiate?

Some aspects of the car lease can be negotiated, such as Capitalized Cost, Money Factor or Interest Rate and Capitalized Cost Reduction. Reducing the Cap Cost Reduction would reduce the monthly payments as well.  Buyout Price too should be negotiated in the beginning itself. Mileage Cap and Charges can be bargained also, and you should definitely try to get the highest value for your car that you trade-in. 

What can’t be negotiated?

negotiate-a-car-lease

Residual value is tougher to negotiate, but you could try if you have good negotiation skills! Acquisition fee, Purchase option fee and Disposition fees are also difficult to negotiate as these are used to attract customers and might already be low.

Always double check all the lease documents to ensure that there are no add-ons which might raise the monthly payments or your signing amount. Don’t leave any blank spaces to be filled up later. Research the deals from manufacturers and dealers to get the best deal.

Article Submitted By Community Writer

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