Leasing a new vehicle is not a consumer friendly process. There are numerous additional elements to negotiate and keep track of that don’t exist in a straight purchase. This article is meant to help you circumvent the leasing minefield and help you to get the best deal possible given market conditions at the time.
1) Negotiate the selling price (known as the capitalized cost in lease lingo) as low as you would for a purchase. Lease ads assume the capitalized cost is at MSRP. You wouldn’t buy a car for MSRP, so why would you be OK basing a lease on it? This is where you have the most potential for getting your lease payment down.
2) Make sure the dealer isn’t marking up the interest rate (known as the money factor in lease jargon). FYI, multiplying the money factor by 2,400 will let you know what the interest rate is. While the interest rate you qualify for is based on your credit history, sometimes manufacturers allow dealers the opportunity to mark it up to make a little money (but not always). The “buy rate” (lease jargon for the unmarked up rate) is what you should ask for. Bear in mind the dealer still has the right to mark up the rate if the manufacturer allows it, and you have the right to walk out of the dealership if they do.
3) Most leases are based on 12,000 or 15,000 miles a year being allowed to be put on the vehicle (in some cases, 10,000 miles). The lower the mileage limit you choose (and stay within), the higher the residual value of the vehicle at the end of the lease (lease jargon for how much the vehicle depreciates off the MSRP during the course of the lease). The higher the residual value, the lower the lease payment. So if you know you can stay within 10,000 or 12,000 miles per year or not much over those limits, you can score a lower lease payment.
4) You can put down a larger capitalized cost reduction at lease inception (lease jargon for down payment). However, unlike for a purchase, you don’t earn equity when leasing. It would be like putting down a down payment when renting an apartment so as to lower the rent to something you can afford. You wouldn’t do that, right? You’d just look for a lower rent apartment elsewhere. Same thing applies here. If you need to put down a large capitalized cost reduction to make your lease payment manageable, you should most likely be looking at a less expensive vehicle, or at least a lower trim level of the vehicle being considered.
5) Lease for a longer lease term. The longer the lease term, the lower your payments. Bear in mind you’re still responsible for maintenance on the vehicle, so that could get more costly as the vehicle ages. A good rule of thumb is not to lease the vehicle for a period longer than the manufacturer’s bumper to bumper warranty.