How to Successfully Negotiate the Terms of Your Car Lease

Did you know that you can negotiate the value of the vehicle, capitalized cost reduction, length of the car lease, mileage allowance, and options and equipment?

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. 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.

As you can guess, 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. 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. 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 payments be?

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.  You can 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. It might reduce your costs enough for you to be interesting.

Some lease offers are based on a specific cap cost reduction. Ask what are the other lease terms and conditions if if you pay 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. 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 full years. Such a lease may be a special offer. The lessors may use the same residual value for the longer term as for the shorter term. He is 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.

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 lease.

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, you will have to complete the full term of the lease and pay any amounts owed. The opportunity to avoid unexpected depreciation and walk away will not be possible.

* The mileage allowance

Common annual mileage allowances in leases are 20,000 km, 25,000 km, or 30,000 km, but you can negotiate other limits. Many lessees drive more than 30,000 km 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 cheaper to negotiate a higher mileage allowance. those extra miles at the end are usually expensive. On the other hand, if you think you’ll be driving fewer miles, you will save money by choosing a lower-mileage-allowance lease.

A lower-mileage lease will also generally specify a higher residual value for the vehicle. A vehicle with fewer miles is worth more. This higher residual value means that you will pay less for depreciation and your monthly payments will be lower.

Therefore, higher-mileage, you’ll pay more for depreciation during the term of the lease. 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 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. The equipment will increase the residual value of the vehicle.

You would then pay only for the amount of depreciation of the equipment during the lease. 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. Most of the time it will not appreciably increase the vehicle’s resale value at lease-end. Ask the lessor about its policy on any equipment you want to add.

In some cases, lessors will not let you add something. If removing it may damage the vehicle or reduce its value. For example, adding a trailer hitch, a luggage rack, or a mount for a car phone. Unless you are willing to leave it on the vehicle.

Negotiate the price for any of these features and accessories. It helps to know the lessor’s costs for these accessories and features.

You can get dealership cost information from a variety of sources on the Internet. Use this information to help you negotiate.

You may also be asked if you want to sign up for a service or maintenance contract. It might include rust-proofing, fabric protection, undercoating, and so forth. These services are optional, and their prices can be negotiated.

You’ll need excellent negotiating skills when you lease a car. By using the above tips, I hope you’ll soon be leasing your vehicle at very favorable terms.

Joan Yankowitz,
publisher of Kwik eGuides