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How to negotiate a car lease Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by offering you interactive financial calculators and tools as well as publishing unique and impartial content. We also allow you to conduct research and compare information at no cost to help you make informed financial decisions. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site are from companies that pay us. This compensation may impact how and where products appear on the site, such as the order in which they may appear within the listing categories, except where prohibited by law. Our mortgage home equity, mortgage and other home loan products. However, this compensation will affect the information we provide, or the reviews you read on this site. We do not include the vast array of companies or financial offerings that could be open to you.
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5 min read published August 09, 2022
Written by Allison Martin Written by
Allison Martin’s work started over 10 years ago as a digital content strategist. She’s been featured in a variety of top financial media outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain confidence to manage their finances by providing concise, well-studied and well-researched content that break down complex subjects into digestible chunks.
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Are you considering taking a car lease that lets you drive elegantly for a fraction of what you would pay to purchase an entirely new car? Knowing about the process of leasing a car and learning the latest terms used in the industry and the ins and outs of lease agreements, is an important part of getting a great deal. Looking around and examining the deals and specials offered by various dealers is a good way to help you negotiate a lease agreement with confidence and ensure that you receive the most suitable lease contract for your needs. When you walk into a dealership to buy a brand new car, the car salesperson expects you to make an offer lower than the asking price. However, this isn’t always the case with leases, but you can follow this step-bystep method to negotiate a car lease. 1. Learn the jargon It is easy to get overwhelmed with the terminology, particularly if you don’t work in the automotive industry. But, you can give yourself some advantage by knowing the terms dealers use prior to you are sitting down to sign a lease contract. Here are some common lease-related terms used by dealers. Acquisition fee This fee which is sometimes also referred to as the assignment fee, or the origination charge is charged by the dealer to create the lease. The amount of this fee can vary from , as per Edmunds. If you do not have the funds to pay for the acquisition fees up front when you sign the lease contract you can roll it into your monthly lease payment. Buyout price A lease buyout typically involves the purchase of a vehicle leased at the end of the lease or in some instances prior to the due date for its expiration. The purchase price is the amount that the dealer will charge you if you opt to make this purchase. Reduced cost of capCap cost -or capital cost reduction are any up-front payment that reduces the amount you can finance. This can include trade-in credit as well as rebates, incentives and even making a larger down payment. Disposition fees Disposition fees are the expenses associated with cleaning the vehicle and getting it in tip-top shape to be sold to someone else after you return it. Gross capitalized cost The vehicle’s sales price, also known by the term “market value, is the cost that has been capitalized gross. “This can be described as a fancy name to describe the cost of the vehicle , including any other charges such as balances, taxes, and other charges,” says David Undercoffler, editor in chief of Autolist. Residual value Residual value is an estimate of what the vehicle is worth at the end of the lease. The figure is determined through depreciation and data from the industry. “With the residual value, the seller will estimate what the car will be worth when you turn it over,” says Mike Quincy who is an auto tester and writer of Consumer Reports. “It’s established at the start of the lease and used in calculating your base monthly payment.” 2. Look for deals Google search for “special lease deals” isn’t enough to get the best deal. Take your search a step higher by creating an outline of all the offers you can find, and consider broadening your search to regions outside of the city you live in. Once you have a list of lease deals for your preferred makes and models, call every dealership to verify the particulars. Also, you should ask about any other deals that aren’t advertised online. 3. Begin the negotiations once you’ve narrowed your options, make a visit to the dealership. Try out the vehicles you’re thinking about and then begin the discussions. Some items the dealer may be willing to discuss include: Buyout price Do you plan to close the lease? If yes, the dealer might be willing to offer you an offer on the purchase cost. “This is a good cost to negotiate at the beginning of the lease if you think there’s a good chance that you’ll decide to purchase the car at the end term,” says Undercoffler. Negotiating the purchase price upfront is crucial since it’s usually not possible to negotiate this cost after the lease has ended, says Undercoffler. Disposition fee You may be able to receive a reduction on the disposal fee if you don’t intend to sell the car or trade it in to a new lease after the lease agreement ends. Make sure to negotiate it in the beginning, rather than trying to negotiate it at the end of the lease. Gross capitalized cost Often dealerships will offer a low monthly payment as a selling point to draw buyers. But, it is important to try to negotiate the vehicle’s cost of sale, which is also its capitalized gross price. Through negotiation, you could be able to negotiate an affordable monthly cost without having to resort to prolonging the lease. “The capitalized gross cost will affect the monthly payment as well as the final purchase figure of the vehicle. The cost is 100% negotiable,” says Nathan McAlpine the owner of CarMate, an auto broker company. In certain circumstances, however like when the dealer offers a specific monthly lease special the cost could be difficult to bargain. In such instances the lease conditions are generally predetermined, according to Undercoffler. The mileage allowance of most leases limit the number of miles you can drive — usually between 10,000 to 12,000 miles annually. And if you exceed the limit each year the lease will impose a penalty to pay. Do not be enticed into accepting a low mileage allowance if you travel a lot. Instead, request a higher allowance at a discounted rate at the time of establishing the lease to save money when you turn the car in. “If you know you’ll be driving more than the allowance for mileage is a great option to negotiate a higher cap on your mileage in exchange for an upfront cost, or not charge whatsoever, as opposed to being hit with a cost per mile when the lease ends,” says Undercoffler. “Just know that if you negotiate a higher mileage cap will decrease the residual value of the vehicle as well as the buyout amount, since the car will theoretically have more miles.” When negotiating your mileage allowance, it’s important to understand how many miles you take. “If you pay for extra miles in advance and you don’t get the money back if you don’t take advantage of them,” says Quincy. The money factor determines the interest rate you pay to lease the vehicle. If you have very good to excellent credit — generally 740 or moreit shouldn’t be difficulty securing the lowest interest rate that the dealership will offer. 4. Sign the contract You’ll need to review the entire lease agreement prior to signing the deal. Lease agreements usually contain the following information the down payment required, if any. The cost of the lease which is sometimes referred to as the money factor or rent cost. It is the value that will be paid for by the car at the start and expiration period of lease. The annual mileage limitation. A comprehensive fee schedule which includes the costs in wear and tear and excessive damage and other charges that you may incur at the end your lease. The cost to end the lease earlier. What can’t be negotiated While you are able to negotiate a variety of fees, there are some limitations. You won’t be able to negotiate the following: Acquisition fee Dealerships usually won’t waive this administrative fee but will allow you to incorporate it into your lease payment if needed. Residual value is also non-negotiable as it accounts for depreciation and industry data. Plus, lowering the residual value by too significantly means that the dealer could be unable to recover the cost if you decide to buy the vehicle instead of turning it in. The bottom line is it is possible to get a good bargain on a lease for a car however you must do your homework prior to visiting the dealership. Not only is it essential to know the terms dealerships use, but you should also evaluate offers from different dealerships, learn what’s negotiable and study the fine print of the lease contract prior to signing the agreement. Learn more
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Written by
Allison Martin’s career started over 10 years prior to that as a digital content strategist, and she’s since been published in numerous prestigious financial publications including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate from late 2021. They are dedicated to helping readers gain the confidence to control their finances through providing concise, well-researched and well-researched content that break down complex topics into manageable bites.
Auto loans editor
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