How to Successfully Negotiate the Terms of Your Car Lease
By: Joan Yankowitz
Did you know that you can negotiate the value of the vehicle,
capitalized cost reduction, length of the lease, mileage allowance,
and options and equipment when you re leasing a car? Here s all
you need to know to get a great deal.
The agreed-upon value of the vehicle just as you can negotiate the
price of a vehicle when you buy it, you can negotiate the value
of a vehicle when you lease it. The agreed-upon value of the vehicle
is the primary component of the gross capitalized cost, so the lower
this value is, the lower your monthly payments will be.
Manufacturers, dealerships, or lessors sometimes offer special incentives
that reduce the agreed-upon value of the vehicle. If this is the
case, you may not have much room to negotiate.
In any price negotiation, it helps to know the lessor's cost for
the vehicle. You can get dealership cost information from a variety
of sources on the Internet and from publications that are available
in most public libraries. Use this information to help you negotiate
the agreed-upon value of the vehicle.
The capitalized cost reduction (cap cost reduction) the capitalized
cost reduction for a lease is like a down payment when buying a
car. The more you pay to reduce the capitalized cost, the lower
your monthly payments will be. The trade-off is that you have to
pay the cap cost reduction up front, and you may not have the lump
sum amount or you may want to do other things with that money.
Ask how different cap cost reductions will affect your monthly payment
(for example, if you pay $1,000 instead of $3,500, what would your
Most lessors restrict the maximum cap cost reduction you may make.
For example, the maximum may be 20% of the MSRP or 20% of the value
of the vehicle.
As an alternative to paying a higher cap cost reduction, you might
be able to reduce your rent charge, and thereby lower your overall
costs, by paying a higher security deposit
You may also want to consider a single-payment lease as an alternative
to paying a higher cap cost reduction, if it will reduce your costs.
Some lease offers are based on a specific cap cost reduction. If
you see a lease offer that is appealing to you, be sure to check
the cap cost reduction and ask how the other lease terms and conditions
would change if you paid more or less up front.
The length of the lease most leases are for 24, 36, 48 or 60 months
(2-5 years). However, you may negotiate a lease for just about any
period in between. Keep in mind, though, that not all lessors offer
all terms for example, some offer only 24- or 36-month leases. Occasionally
you may find leases with terms shorter than 24 months or longer
than 60 months.
Sometimes you may find a lease for a period other than a full year--for
example, 39 months instead of 36 months. Such a lease may be a special
offer. For example, the lessors may use the same residual value
for the longer term as for the shorter term, thereby spreading the
depreciation over more months and reducing the monthly payments.
When evaluating such a lease offer, be sure to compare all the other
lease terms in addition to monthly payments. Unless the lessor is
making a special offer, such as in the example, negotiating a different
term for your lease will change the residual value in the monthly
The longer the term of your lease, the lower the residual value
will be (because the vehicle will be older when you return it).
Thus, you will pay more in total depreciation with a longer-term
Try to match the length of the lease to your needs and preferences.
Negotiating a longer lease will generally lead to a lower monthly
payment, but deciding to end a longer lease early could be costly.
In a closed-end lease, the opportunity to avoid unexpected depreciation
and walk away occurs only when you have completed the full term
of the lease and paid any amounts owed.
The mileage allowance common annual mileage allowances in leases
are 10,000 miles, 12,000 miles, or 15,000 miles, but you can negotiate
other limits. Many lessees drive more than 14,000 miles a year.
Try to match the miles you will be driving to the mileage allowance
in the lease.
If you think you're going to be driving more miles than the lease
allows, it's generally better to negotiate a higher mileage allowance
in the lease than to pay for the extra miles at the end of the lease.
On the other hand, if you think you'll be driving fewer miles, you
may be able to save money by choosing a lower-mileage-allowance
A lower-mileage lease will generally specify a higher residual value
for the vehicle because a vehicle with fewer miles is worth more
and is expected to have less wear. This higher residual value means
that you will pay less for depreciation and your monthly payments
will be lower. In contrast, a higher-mileage lease will generally
specify a lower residual value for the vehicle because a vehicle
with more miles on it when it's turned in is worth less than a lower-mileage
Therefore, you'll pay more for depreciation during the term of the
lease. And if you don't use those miles, you may not be entitled
to a refund at the end of the lease. If the lessor has a refund
policy, it should be stated in the lease.
Dealership- and consumer-installed options and equipment just as
when you buy a car, you can choose the features you want and add
accessories to a leased vehicle. You may want to upgrade the sound
system, install a leather interior, or add a sunroof to the vehicle.
It may be preferable to have those items included in the lease rather
than added after you lease the vehicle because if the lessor considers
the equipment, for resale purposes, as adding value, the equipment
will increase the residual value of the vehicle.
You would then pay only for the expected amount of depreciation
of the equipment during the lease, not for the full cost of the
equipment. However, lessors often have different policies for determining
what is value-adding equipment.
Adding an extra feature may increase your personal enjoyment of
the vehicle, but it may not appreciably increase the vehicle's resale
value at lease-end. Ask the lessor about its policy on any equipment
you want to add.
Also, in some cases, lessors will not let you add something if removing
it may damage the vehicle or reduce its value. For example, you
may not be able to add a trailer hitch, a luggage rack, or a mount
for a car phone unless you are willing to leave it on the vehicle.
Be prepared to negotiate the price for any of these features and
accessories. It helps to know the lessor's costs for these accessories
You can get dealership cost information from a variety of sources
on the Internet and from publications that are available in most
public libraries. Use this information to help you negotiate.
You may also be asked if you want to sign up for a service or maintenance
contract or for rust-proofing, fabric protection, undercoating,
and so forth. These services are optional, and their prices can
You ll need excellent negotiating skills when you lease a car. By
using the above tips, you ll soon be leasing your vehicle at very
Joan Yankowitz publishes the popular consumer
and business Kwik eGuides at www.kwikeguides.com.
Instantly download How to Buy a Car Without Getting Scammed Kwik
eGuide at www.kwikeguides.com/car_scam.htm
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