9 Tips for Negotiating a Car Lease

In these challenging times of rising interest rates, it has never been more important to negotiate the best terms possible when leasing a car online.

Leasing a new car — rather than buying — can still save you money but many people looking for a new car don’t even realize that you can negotiate some of the terms of the lease.

You may be able to double down on the money you save or afford a more expensive car with a few negotiation tips from the pros. And, remember, while lower monthly payments are important, they’re not the only consideration during the negotiating process.

Let’s take a closer look at the following nine tips for negotiating a car lease so that you can nail the lease you want…

1. Understand the leasing jargon
2. Research leasing deals to understand the market 
3. Estimate your intended mileage
4. Understand what you can negotiate
5. Understand what you can’t negotiate
6. Go beyond the car price and monthly payments
7. Be aware of upsells, freebies and add-ons
8. Be flexible and choose a vehicle in stock
9. Check the fine print on the agreement

1. Get to grips with the leasing jargon

The terminology used in car leasing agreements can get confusing so the first rule of negotiating a car lease is to brush up on the jargon.

There are many potential areas for confusion but these are the terms you’ll probably hear most often:

• Gross capitalized cost - this is simply the vehicle’s market value or price (plus fees, balances and taxes).
• Residual value - the estimated value of the car at the end of the lease. The leasing company uses third-party analysis of the vehicle and marketplace to determine depreciation.
• Money factor - this is the relevant interest rate applied (the financing cost of the lease).
• Cap cost reduction - the capital cost reduction or the upfront payments that you make to reduce the amount you finance (down payments, trade-in credits, incentives and rebates).
• Acquisition (or “assignment”) fee - this is the fee assessed by the dealer to create the lease and is usually paid upfront — but may be included in the monthly lease payments.
• Disposition fee - this covers the costs of preparing the vehicle for the next lease after you return it.

2. Research deals to understand the market 

You probably wouldn’t buy a new laptop or smartphone without doing some research. The same applies to car leasing. To negotiate a new car lease effectively, you need to know what’s available on the market.

Fortunately, you have the tools to compare deals right in front of you. Google will help you identify the best current lease deals. 

Start making a shortlist of what’s available (and where) for your favorite makes and models. You may be lucky and find special lease deals available on models that the manufacturer wants to promote or the dealer wants to move on. 

When you’ve whittled down your choices to a manageable number, call the relevant dealers to confirm what’s available and start evaluating which is the best for you.

3. Estimate your intended mileage

It’s important to understand how far and how often you’ll drive the vehicle you lease.

Just as you might do when choosing phone or internet packages, you need to understand your intended usage to avoid paying extra for something you don’t use or when you exceed limits. 

Car leasing companies tend to place an emphasis on the potential depreciation of the vehicle when calculating lease terms. So, they often limit lease deals to 10,000 or 12,000 miles annually.

If you are unsure of how many miles you drive per year, you may be opening yourself to paying more than necessary. For example:

• If you underestimate your mileage, you may be slammed with excess mileage penalties at the end of the lease.
• If you overestimate your mileage, you’ll face higher costs built into the terms of your lease agreement to cover extra depreciation.

Understanding your mileage can help you negotiate a more relevant lease deal for your usage.

4. Understand what you can negotiate in a car lease

So, what can you negotiate in a car lease?

When a potential car buyer walks onto a car lot, the salespeople are expecting some kind of negotiation process. The salesperson will likely know within the first five minutes of the conversation whether you’re likely to negotiate and what their lowest offer will be.

You can’t negotiate everything with a lease but there may be some flexibility with the following elements of your agreement:

• The gross capitalized cost (total sales price) of the vehicle - negotiating this (and it is nearly always negotiable) is likely to have a big impact on your monthly payments.
• The interest rate (“money factor”) - another major factor that can be negotiated, especially if you have an excellent credit score (740 or higher).
• Mileage allowance - for instance, you may be able to negotiate a high-mileage lease to avoid penalties when you turn the vehicle in.
• Buyout price - negotiate this before you sign the agreement if you’re considering purchasing the vehicle at lease-end (you won’t be able to negotiate later).
• Documentation/disposition fees - you may be able to lower some of the arbitrary leasing company charges.
• Destination/freight charge - be wary if this charge is added separately at the end as it is usually included in the vehicle price (capitalized cost).

By negotiating your lease deal, you may be able to get an affordable monthly payment without extending the lease term.

It’s worth reiterating how important your creditworthiness is. Leasing companies want to minimize their risk. An excellent credit score puts you in a stronger negotiation position with the leasing company. If you’re not sure about this, find out more in our article about credit scores for leasing a car.

5. Understand what you can’t negotiate

Unsurprisingly, perhaps, special lease deals are more difficult to negotiate as they’re usually discounted already. 

For instance, you’ll probably find it tough to negotiate a mileage cap on a special manufacturer lease deal.

You usually can’t negotiate the following elements of a car lease either:

• Acquisition fee - you’ll have to pay an administrative fee but you may be able to negotiate for it to be included in your lease payments.
• Residual value - the residual value of the vehicle is set by independent assessment and if the dealership lowers it, profits will be reduced if you decide to purchase the car at lease-end.
• Taxes and other mandatory fees - the dealer has no room to negotiate on many of these fees, including taxes and registration fees that are “pre-baked” into agreements.

6. Go beyond the car price and monthly payments

Remember, you’re not getting a great deal unless it’s a good car that meets your needs and your budget. 

You’ve seen that there are many factors to consider when negotiating a car lease and you should examine each proposed agreement carefully to analyze opportunities for a better deal. 

It’s not just the monthly payments that matter but the lease’s total cost (including down payments, fees, interest payments, etc.). If you intend to buy the vehicle at lease-end, the buyout price is also important.

Car salespeople can be tricky to deal with and may present a low monthly payment as an amazing deal when, in reality, you’re being charged in other ways too. Be prepared for this by using the strategies that car salespeople hope you don’t know.

Note that the best deals usually come about by minimizing the difference between the capitalized cost and residual value.  Not all makes and models depreciate at the same rates. So, negotiating the cap cost and finding vehicles with high residual values after their first few years of depreciation can help you secure the best deal possible.

7. Be aware of upsells, freebies and add-ons

Different manufacturers and car dealerships use different methods to make deals more enticing. These may include different upsell and cross-sell methods, such as prepaid maintenance deals.

There may also be special offers and freebies available that an enterprising salesperson can throw in — don’t be afraid to ask for them as the salesperson will want to earn commission and will be keen to make a deal.

Conversely, unnecessary add-ons may add to your monthly costs and potentially scupper a deal. Do you really need the extended warranty? Take your time and understand exactly what’s necessary and what’s not — and what you’ll be paying extra for.

8. Be flexible and choose a vehicle in stock

Choosing a vehicle in stock is not only likely to get you your leased vehicle quicker; it may also get you a better deal.

It may be tough to find the precise make, model and color you want in stock but if you can be flexible, it can help you negotiate and save a significant amount of money. 

The dealer doesn’t want cars sitting on the lot for months on end so it’s often easier to get a better deal on cars in stock.

9. Check the fine print on the agreement

Carefully review the entire lease agreement, including the fine print, before you sign it. Pay special attention to the following details:

• The down payment required 
• The total cost of the lease
• The money factor (interest rate)
• The value of the car at the start and end of the lease
• The mileage cap
• The fee schedule
• Possible charges at lease-end (e.g., excessive wear and tear, excess mileage)
• Costs to end the lease early

Remember, you’re signing a binding contract — and that should not be a process you rush.

Leasing a car online can help you minimize the costs of driving the car you want — provided you are prepared to negotiate. To do that, you need to shop around, understand what you can and can’t negotiate, get to grips with the jargon and the fees, and check the finer details of the deal.

With a FINN car subscription, you can avoid the hassles of negotiating a car lease. 

Our fast and flexible service approves deals in minutes, arranges doorstep delivery and takes care of insurance, registration and roadside assistance — with no down payment necessary.