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How to Lease a Car & Negotiate Your Lease Deal

Learn how to lease a car like a pro by simply following these steps that experts suggest.

By Allan Halcrow | American Express Credit Intel Freelance Contributor

5 Min Read | November 06, 2019 in Life

 

At-A-Glance

You’re more likely to get the deal you want if you plan ahead.

It’s a good idea to know in advance how much you can afford, including all fees and costs.

Experts say you can get a better deal if you’re prepared to negotiate—and read the fine print!

You’ve weighed the pros and cons of leasing versus buying a car and concluded that leasing is definitely the best option for you—well, the right lease is the best option for you. Of course, wanting the right deal is no guarantee you can walk into a dealership and get it. But the odds of getting the right deal can be better if you plan ahead and go in prepared.

 

Knowing What You Can Spend

You and the dealer both want the best possible auto lease deal, but they’re likely not the same deal. The dealer knows his or her costs and what it will take for the deal to be profitable. Don’t you want to know your numbers, too? Experts suggest that you look at your overall budget to determine how much you can comfortably spend on a car. The editors of U.S. News & World Report’s automotive comparison site also suggest you allow for more than just the lease payment. Consider insurance (which will likely cost more if leasing rather than buying the car) and gas, too.1

 

Doing Your Research

The first step is to gather information, both about your situation and your options.

  • What kind of credit score do you need to lease a car? The average credit score for consumers starting a new auto lease in the first quarter of 2019 was 725, a slight increase from 722 for full-year 2017.2 So if you have poor credit you may want to stop your process here. You will likely have a tough time getting a favorable lease if your score is less than 670.3 Although some dealers might be willing to lease to you if your score is below 620, experts say you’ll pay much more than the average lessee and might be required to make a security deposit.4
  • Know how you use your vehicle. Do you just commute to and from work, or do you take frequent weekend excursions? You don’t want to negotiate mileage limits that are too small (or too generous—there’s no point in paying for miles you don’t drive) and find out later you misjudged.
  • Know the value of your trade-in. If you have a previous car (and own it), a trade-in can work for you. To use it to reduce the cost of the lease it should be paid for (dealers may fold the unpaid portion into your lease, but then you’d be paying for two cars and driving one) and you should know what it’s worth. 
  • Know the price of the car. When you know what kind of car you want, it’s good to find out what they typically sell for. That information could be valuable when it comes time to negotiate.
  • Look for deals. Manufacturers sometimes offer incentives on models that aren’t selling well or when the model year is being phased out.

 

How to Negotiate a Car Lease

Although there are many differences between leasing a car and buying it, negotiating the price of the car (known in leasing lingo as the capitalized cost or “cap cost”) generally is not one of them. You may wish to haggle, because the better cap cost you get the less your lease will cost.

In fact, negotiating a car lease can sometimes start before you actually begin negotiating the car lease! Some experts suggest that you negotiate a purchase price before you reveal that you are considering leasing. Once you’ve worked out the purchase price, you may also be able to negotiate mileage limits and other terms of the lease. As always, shopping around can benefit your price bargaining—you’ll likely save money if dealers are competing for your business.

 

 

Knowing the Total Cost of the Car

Knowing your monthly payment, or even the total cost of the lease, is not the same as knowing the total of what you’re spending. That’s because leasing is a complicated transaction with several potential additional costs.

  • Insurance. Because they own the car, dealers may require you to carry higher levels of insurance than you would purchase on your own. They may also require you to carry gap insurance, to cover the difference between the car’s value and what you owe if the car is stolen or totaled in a collision.
  • Taxes. Though the specifics vary from state to state, you’ll probably save on sales tax by leasing instead of buying. But you may pay more in property tax.
  • Acquisition fee. An amount charged for setting up a lease. The fee is typically $1,000 or less.6
  • Disposition fee. The lease-end equivalent of the acquisition fee. In theory, it compensates the dealer for prepping the returned car for re-sale.
  • Security deposit. Funds collected by the dealer to protect against damage or default. Dealers don’t always require security deposits. If they do, ask whether you’ll get it back if you return the car as promised.

It’s a good idea to ask the dealer to disclose all fees before drawing up the contract.

 

Reading the Fine Print

Leasing agreements can be daunting to read and understand—long, complex, and often full of legalese. Experts recommend taking your time to read the agreement and to be sure that you understand it—and if a dealer pressures you to sign anything before you’re ready you should be prepared to walk away. It’s not easy to get out of a lease once signed.

 

The Takeaway

Learning the ins and outs of how to lease a car can help you get the best deal for the car you want. Experts say it’s important to do your research, ask questions and advocate for what you want. If you take those steps, you’ll likely negotiate a lease for the right car at terms that make financial sense. And you’ll reach your destination.

Allan Halcrow

Allan Halcrow is a freelance writer concentrating in business, human resources, and diversity and inclusion. He is also the author of four books on management.

 

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express. 

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