Auto Advice Corner

Tips on Auto Lease negotiation

You can compare different auto lease offers and negotiate some terms. Consider …
  • The agreed-upon value of the vehicle -- a lower value can reduce your monthly payment
  • Up-front payments, including the capitalized cost reduction
  • The length of the auto lease
  • The monthly auto lease payment
  • Any end-of-lease fees and charges
  • The mileage allowed and per-mile charges for excess miles
  • The option to purchase either at lease-end or earlier
  • Whether your auto lease includes "gap" coverage, which protects you if the vehicle is stolen or totaled in an accident.

Ask for alternatives to advertised specials and other lease offerings.

Finally, compare lease vs buy options using our auto finance calculator tool.

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Advice Corner

Automobile Leases – Lease Terms

An auto lease is a lease contract between a lessor (the owner of the vehicle – usually the dealership) and a lessee (the person wishing to used the vehicle) for the use of a vehicle, subject to the terms of the lease, for a specified period and at a specified payment. Auto or car lease is a popular form of car finance since little or no down payment is required.

Types of Leases
With an auto lease, there are two types of leases:

Closed-end - a lease agreement in which the lessee is not responsible for the difference in value when the actual value of the vehicle at the scheduled end of the lease is less than the residual value except for excess wear and damage charges and excess mileage.

Open-end - a lease agreement in which the amount you owe at the end of the lease term is based on the difference between the residual value of the leased property and its realized value. Your lease agreement will require you to pay the difference if the realized value is less than the residual value. Or you may get a refund if the realized value is greater than the residual value at scheduled termination.



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Up-Front Costs.
Common up-front costs associated with a vehicle lease are:

Capitalized cost reduction. Any cash down payment, trade-in allowance, and rebate. This helps to reduce the monthly auto lease payments.

First month payment. In multiple-payment leases, the first monthly payment is typically due at lease signing. Some leases require that the last monthly payment or several of the final monthly payments be paid at lease signing.

Security deposit. Many auto leases require that a security deposit be paid at lease signing. The security deposit may be used by the lessor in case you default, or at the end of the auto lease to offset any amounts you owe under the lease agreement. Any remaining amount may be refunded to you.

Taxes. Taxes may be due at lease signing, depending on the tax rules of the state and county in which the vehicle is located. Common types of taxes include:

  • State or local sales tax on any capitalized cost reduction
  • State or local sales tax on the adjusted capitalized cost
  • State or local property taxes on the vehicle
  • County or other local taxes
Optional insurance and services. Optional insurance products and other services when you lease a vehicle include:
  • Gap coverage (if gap coverage is required, premiums are included elsewhere in the lease)
  • Vehicle maintenance or service contract or mechanical breakdown protection.
Other charges. Other charges may be assessed at lease signing, such as
  • Vehicle license and registration fees
  • Vehicle title fee
  • Dealership documentation fee.

Ongoing Costs. Ongoing costs of a vehicle lease are the monthly payments, vehicle insurance, repairs and maintenance, personal property taxes (where applicable), and registration and inspection fees.



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