Approach negotiations like a buyer.
For Women & Co. by Stephanie Taylor Christensen, Wellness on Less - 09/04/2013
These days, demand for auto leases is incredibly high. But despite competitive offers, leasing a car involves a lot of unfamiliar terminology, trade secrets, and hidden fees that could end up costing you significantly more than you (and your budget) expect. Here are four tips for negotiating the best auto lease:
1. Know what cars are worth leasing.
Whether or not a car is “worth” leasing rests on the car’s residual (resale) value. LeeAnn Shattuck, owner of Women’s Auto Solutions, says that high-end brands typically have strong lease programs, but some mid-priced cars are great lease candidates as well because of their strong finance arm and great residuals. However, despite strong lease programs, Shattuck says American cars are rarely good to lease because of lower residuals. Consult credible industry publications like Kelley Blue Book to research current residuals before you’re tempted by an advertised lease offer.
2. Budget your payment scenarios.
Finding a good deal on leasing has more to it than a monthly payment—but knowing what you can afford is a critical place to start, so you understand what you can afford to negotiate. That means calculating the financial impact of various monthly payment amounts and different lease agreement terms, including a down payment, number of years you’ll lease, and a possible dealer trade-in (versus selling the car for potentially more money on the private market).
Approach negotiations like a buyer.
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3. Approach the process like a buyer.
Though your budget revolves around the monthly lease payment, Shattuck says to focus on the purchase price, which ultimately drives the lease price. “Approach negotiations like a buyer, and never tell a dealer you are thinking about leasing until all other areas of the deal have been negotiated and put in writing.” Once you have negotiated a strong “buy” deal, she suggests mentioning that you’d like to see what the deal looks like for a possible lease, including origination or administrative fees, security deposits (which you should try to get eliminated), the gross and net cap cost, the residual, and how tag/title fees fit into the lease price. If you’re not comfortable playing “hardball” in person, do it over the phone.
4. Think outside the box.
Scot Hall, executive vice president of Swapalease.com, says that though the financing arm tied to the dealer frequently offers the best terms and incentives, you should shop for a better offer at banks and credit unions before you make assumptions. If you’re unsure you want to commit to a lease for several months or years, consider taking over an existing lease through a lease transfer company. Not only does such an arrangement save you the hassle of negotiations, a shorter lease term can mean less money spent on car maintenance. Shattuck also notes the importance of staying on top of the status of your lease payoff. “Any time the market value of the car is greater than or equal to the payoff amount of the lease, you have the option to pay the loan in full, sell the car and pocket the difference!”