How to Lease a Car

Getting the Best Lease Deal

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   Negotiate the final purchase price first. The leasing option you get on your car will depend on the negotiated purchase price. The lower the total price of the car, the lower the payment, even with leasing. It's best to have this hammered down first, and in writing, so that the salesperson cannot step back and try to hoodwink you once you get down to the nitty gritty details.

   1. Know about the invoice price of the car. The invoice price is the price the dealer paid for the car. While it's not reasonable to expect to negotiate a price at or lower than the invoice, it's a good general area to shoot for. Your final negotiated price should be somewhere between the invoice and the suggested retail price.
   2. Walk away if the salesperson brings a four-square worksheet into the negotiation. A four-square worksheet is a sleight-of-hand trick the dealership uses to confuse the buyer about their options. Some dealers work with it extensively. If your salesperson brings one out, tell him that you won't continue negotiating until it's been put away.
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   Once a final purchase price has been agreed upon and put in writing, negotiate the leasing terms. The bigger your initial down payment, the lower your monthly payments will be. At the same time, you may be able to get a deal with no down payment and a relatively low monthly payment, according to US News best lease deals of 2013.^[1]

   1. Know what your total "capitalized cost" will be. Your capitalized cost is a fancy terms for the negotiated price of the vehicle, plus the acquisition cost, plus the destination fee.^[2] This is the money you'll be paying, not including the monthly payments, in order to lease the car.
   2. Factor in any "capitalized cost reductions." Capitalized cost reduction is any cash down payment, trade-in credit, or rebate that reduces your total capitalized cost.
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   Walk away if you think something is fishy, or suspect you're being taken advantage of. Dealerships are hard places to feel like both parties have actually gotten what they wanted. Too often, the customer feels a sour taste in his or her mouth after they learn of "fees" and "adjustments" that are tacked on to the final cap cost. If you're not afraid to walk away from the dealership, the dealer is forced to bargain with you — the honest way. You're telling them that you're a straight shooter, and you won't tolerate any tricks or nonsense.
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   Know the relationship between a car's residual value and monthly payments.^[3] The vehicle's residual value is the value of the car after you've finished leasing it; it's useful if you decide to buy the car after your lease is up.

   1. You'd think you'd want a low residual value on your car after your lease is up. Say your car is worth $20,000, and the residual value is worth $10,000 after a 3-year lease. That means that you can buy the car for $10,000 after three years.
   2. Great, right? Not always. If you the residual is $10,000 after three years, that means you use up $10,000 of the car's value during those three years. That means your average monthly payment, divided by 36 months, is $277 plus interest and fees.
   3. What if your residual is $13,000 after three years? That means you use up $7,000 of the car's value, setting your average monthly payment at $194. Higher residuals mean lower monthly fees, although lower residuals mean you can buy the car for less once the lease is done.
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   Don't get so obsessed with the monthly payment number that you forget about fees. Dealerships are smart; they'll dangle the magical monthly payment number in front of your eyes, and then pack on fees toward the end of the negotiation, often raising the capitalized cost significantly. After haggling with you for an hour or two, the dealer knows that it seems wasteful for you to derail the negotiation over one $300 fee here, another $75 fee there, and one $650 fee for good measure. They'll use this psychological understanding to their advantage. Don't let them.

   1. Dealerships often levy a fee for turning in a leased car and not leasing another car from the same dealership. This is sometimes called a disposition fee.
   2. Dealerships also levy a fee for deciding to buy the car after the term of the lease has ended. This is sometimes called a purchase fee.
   3. These fees and surcharges are generally negotiable. Remember, the dealer is betting that you're attached to the car enough to eat the fees, even if they're noxious. If you're willing to walk away, the dealer loses much of their power.
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   Check for any rebates associated with the car. Go to the manufacturer's website directly and look for rebates associated with leasing the car. These rebates are typically applied to the down payment of the car, although they sometimes help lower the residual cost of the vehicle.^[4] Be aware that some dealers will misinform you that certain rebates don't apply to leasing arrangements. Don't believe them at their word; certain rebates are specifically designed for leasing arrangements.
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   Look over the lease agreement. Discuss your financial liability for periodic maintenance and repairs. If you do not understand something, ask for complete clarification. In the end, you are signing a legal document and will be held responsible for what it says. Sign the leasing document if all is agreeable.

   1. Realize that you will easily lose an average of half the value of the car to depreciation when the leasing period is over.
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   Enjoy your beautiful, new car. Make all of your payments on time and pay strict attention to mileage clauses, or this will change what happens when you turn in the car at the end of the lease.