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Automobile Leases - Comparing Lease Offers
When shopping for a
vehicle lease/car lease
, you can negotiate some terms and conditions (the length of the lease and the mileage allowance). Other terms and conditions (the residual value) may not be negotiable. However, by shopping around and comparing the terms offered by different lessors, you can save on the nonnegotiable items.
Before you commit or sign
Auto Leasing is complicated, so understand your rights and responsibilities when leasing a vehicle. There generally is no 3-day right of rescission when either buying or leasing a vehicle. A dealership may have its own policy that allows you to return the vehicle within 3 days, but be sure to see the policy in writing before signing any agreements.
Before signing the auto lease agreement, be sure to review the lease documents to make certain the terms and conditions you have negotiated have been entered in the blanks on the form:
- The agreed-upon value of the vehicle – verify that the negotiated amount appears in the agreed-upon value of the vehicle line on the lease form.
- The agreed-upon trade in value - verify that the negotiated value appears on the net trade-in allowance line on the lease form.
- Cash payment - verify that your cash payment for the first payment, security deposit, and capitalized cost reduction appears on the amount to be paid in cash line on the lease form.
- Rebate or discount - if a rebate or discount was negotiated or included in the deal, verify that this amount has been credited in the amount due at lease signing or delivery on the lease form.
Things that are Negotiable:
Value of the vehicle – The value of a vehicle when you lease it is negotiable. The agreed-upon value of the vehicle is used for determining the gross capitalized cost. The lower this value is, the lower your monthly payments will be. Manufacturers and dealerships 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.
Capitalized cost reduction - The capitalized cost reduction on a auto 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. This is an up front payment, and you may not have the lump sum amount. Ask how different cap cost reductions will affect your monthly payment.
Length of auto lease - Most auto leases are for 24, 36, 48 or 60 months. However, you may negotiate a lease for just about any period in between. Clearly, you want to match the length of the lease to your specific needs and preferences. Negotiating a longer auto lease generally will lead to a lower monthly payment. However, canceling a longer lease early can be very costly.
Mileage allowance – This is an area where you want to match with your needs and preferences. Annual mileage allowances in leases are generally 10,000 miles, 12,000 miles, or 15,000 miles, but you can negotiate other limits. Many auto lessees drive more than 14,000 miles a year. Negotiate with the dealer so you match the miles you will be driving to the mileage allowance in the lease. This is by far less costly that if you were to exceed the mileage allowance and then have to pay for the excess miles at the end of the lease.
Vehicle options and equipment – With a leased vehicle, you can choose the options and add accessories you want. For example, you may upgrade the sound system, select the leather interior option, or add a sunroof to the vehicle. Ask the dealer/lessor about its policy on any equipment you want to add. Often, a dealer can include one or two additional options without increasing the capitalized cost, so don’t be afraid to negotiate.
Service and Maintenance – Often a dealer would include the first one or two years of service for no additional charge. Again don’t be afraid to ask.
Use this auto finance calculator to evaluate if you should lease or buy your new car.