Help me understand how to negotiate a car lease

[HadEnuff]

I've never leased a vehicle. I may need to in the very near future.

I've read some posts on these boards that indicate to me there are some very knowledgable people around here, on this subject.

What are the various factors in a lease, besides monthly payment, that really reflect what one is actually paying, and which are the ones that may be negotiable?

Assume I know nothing.

[sripunp]

LEASEHACKR

i've been using this website for about a year now. it is a very helpful and knowledgeable site.

[karimod]

The dealer will be focused on selling you the "low monthly payment". The real items you need to find out and negotiate on are things like the selling price (less all applicable advertised and 'hidden' incentives) and the money factor (think interest rate). In addition, different cars will have different residual values, plus a bunch of other lease variables which makes apples-to-apples comparisons difficult if you're shopping across brands.

My recommendation is to settle on a specific model and trim with exact equipment you want, negotiate the selling price including which incentives are being applied, and the money factor. Lock down the specifics with one dealer then bounce the exact same variables with 2 others and go from there...

[marko]

I lease higher end luxury cars. My approach is to solely focus on what my monthly payment might be.

I tell my salesman what I want to pay and let him figure it out. If he can't come close the the price, I walk away. He'll call back in a day and have his best price and we go from there.

As noted, be sure to specify the exact equipment you want so that they don't give you your expected price against some stripped down model.

Also with today's low interest rates, I tell them I want a 'no money down' price and essentially finance the deposit as well.

[HadEnuff]

Quote:

Originally Posted by sripunp LEASEHACKR i've been using this website for about a year now. it is a very helpful and knowledgeable site.

Looking at this site raises a question for me. What is the difference between a "security deposit" and a "down payment" in how they are applied?

[Lakewood90712]

Why do you " NEED TO " lease ?

[Totoro]

Quote:

Originally Posted by HadEnuff Looking at this site raises a question for me. What is the difference between a "security deposit" and a "down payment" in how they are applied?

A security deposit comes back when you return the car in good condition.

A down payment is gone. A larger down payment therefore results in a lower monthly rate.

Not completely versed in the US leasing contracts, but in general:

• Watch out for contractual gotchas: if a lease rate is calculated for a certain mileage, what happens when you go over or under? What if you want to end the lease sooner or later?
• What is included? Just the car, or also maintenance, insurance ..
• What type of insurance is included, and what deductibles?
• Who will actually lease you the car? It's usually not the dealer
• Are winter tires included? Do you have to go to a dealer for maintenance or can you freely choose?

In a more advanced version: ask for the individual components, especially interest % (should be below 4%), insurance (check vs. your own rates), and buy price of the car (check online).


You won't be able to get a fantastic deal this way, but you should manage to not get shafted at least.

[BeachOrCity]

There is a lease negotiating servcie by the consumer org checkbook.org You have to pay them, but they do a phenomenal job.

[aja8888]

Quote:

Originally Posted by BeachOrCity There is a lease negotiating servcie by the consumer org checkbook.org You have to pay them, but they do a phenomenal job.

This appears to be a regional service (east coast and parts of the west coast. But a good reference site.

[HadEnuff]

Quote:

Originally Posted by Lakewood90712 Why do you " NEED TO " lease ?

I want my wife to have a reliable car. I don't want to purchase a car for several reasons.

1. I'm nor sure the car she wants now is going to be car she, or we, will want in 3 or 4 years.

2. I want to minimize the monthly payment, in order to keep MAGI down

3.I don't want to come up with a slug of cash right now, because I want to use my after tax funds to live on, rather than distributing extra funds from my IRAs, again, in order to keep MAGI down.

[aja8888]

My responses are in red: (just some factors to think about)

I want my wife to have a reliable car. I don't want to purchase a car for several reasons.

Purchase or lease - the car is reliable when new

1. I'm nor sure the car she wants now is going to be car she, or we, will want in 3 or 4 years.

You can sell or trade a purchased car after that time, (actually anytime but difficult if leasing).

2. I want to minimize the monthly payment, in order to keep MAGI down

What does payment size have to do with MAGI?

3.I don't want to come up with a slug of cash right now, because I want to use my after tax funds to live on, rather than distributing extra funds from my IRAs, again, in order to keep MAGI down.

You can buy a car with a small down payment if you have good credit. Leasing a car will require a substantial sum down also. Besides, interest rates are less if you buy.

[HadEnuff]

Quote:

Originally Posted by aja8888 My responses are in red: (just some factors to think about) I want my wife to have a reliable car. I don't want to purchase a car for several reasons. Purchase or lease - the car is reliable when new 1. I'm nor sure the car she wants now is going to be car she, or we, will want in 3 or 4 years. You can sell or trade a purchased car after that time, (actually anytime but difficult if leasing). Yes, but with a lease I know what the terms will be. If I own the car and want to get rid of it, I am likely to take a much bigger hit on trade-in value, especially if it turns out the car has a history of being a dog, or if there is an unfavorable CARMAX on it, due to an accident. 2. I want to minimize the monthly payment, in order to keep MAGI down What does payment size have to do with MAGI? If the payment is high, I have to have $ available to pay it, which would involve either spending my after tax money down, or taking an IRA distribution, neither of which I want to have to do. 3.I don't want to come up with a slug of cash right now, because I want to use my after tax funds to live on, rather than distributing extra funds from my IRAs, again, in order to keep MAGI down. You can buy a car with a small down payment if you have good credit. Leasing a car will require a substantial sum down also. Besides, interest rates are less if you buy.

that varies. Which is why I want to understand more about how leases work, and what numbers may be negotiable.

[RunningBum]

Quote:

Originally Posted by aja8888 What does payment size have to do with MAGI?

A loan payment is (almost) always going to be higher than a lease payment. A higher monthly expense means you're likely to have to take a larger withdrawal from a retirement account, or liquidate some holdings with a possible capital gain. Of course there are exceptions, but maybe not for the OP.

[Jerry1]

I've been leasing for about 10 to 15 years. I focus on two year leases and I tended to get Buicks because their bumper to bumper warranty was 50,000 mile. I would do two year 50,000 mile leases and I never negotiated one of them because I was getting the GM employee discount. Understandably, that means I can't answer all your questions, but I can give you some perspective.

1st - someone said that you need a down payment. No. I never paid anything out the door except the first month's lease payment and title/license plate transfer.

2nd - If you drive a lot of miles like I did, focus on the payment per mile. The lease I'm about to turn in was .31 per mile (monthly payment divided by monthly miles allotted). Compare that to a new car and I think you'll be pleasantly surprised. Remember, in this scenario, I never have to pay to repair the car. Brakes and tires don't wear out that quick and GM even covered a lot of the oil changes and tire rotations (however, not always).

3rd - if you just want reliable transportation, you could get that cheaper, but in a lease situation, you can also do well if you are a very low mileage driver. In that case, focus on the monthly payment. Your per mile may be high, but especially this time of year, you can get some really good low mileage leases.

4th - don't worry about all the horror stories. As long as you have insurance and you are respectful of the car, you're not going to have problems at turn in. I never have. They specify what is normal wear and tear and it's pretty liberal.

Again, leasing my not be the cheapest way to drive, but in my experience, it's been a good alternative because I like new cars, I don't like having to deal with having my cars worked on and I've never liked selling cars.

[sripunp]

Quote:

Originally Posted by HadEnuff Looking at this site raises a question for me. What is the difference between a "security deposit" and a "down payment" in how they are applied?

Quote:

Originally Posted by Totoro A security deposit comes back when you return the car in good condition. A down payment is gone. A larger down payment therefore results in a lower monthly rate. Not completely versed in the US leasing contracts, but in general: Watch out for contractual gotchas: if a lease rate is calculated for a certain mileage, what happens when you go over or under? What if you want to end the lease sooner or later? What is included? Just the car, or also maintenance, insurance .. What type of insurance is included, and what deductibles? Who will actually lease you the car? It's usually not the dealer Are winter tires included? Do you have to go to a dealer for maintenance or can you freely choose? In a more advanced version: ask for the individual components, especially interest % (should be below 4%), insurance (check vs. your own rates), and buy price of the car (check online). You won't be able to get a fantastic deal this way, but you should manage to not get shafted at least.

MSD or Money security deposit is the money leaser put down to buy interest rate. the more money leaser put down the lower the rate. leaser WILL get the whole MSD back once the lease is over. The damage (ding, dent, tear, etc) will be bill to you later. MSD will not be deducted.

[Bamaman]

When working, I administered some of the largest U.S. lease portfolios. And I could literally write a book on the subject.

But most leases presently are retail leases, and most are being "sold" at MSRP. And the payments are certainly negotiable, as it's the lowest payment you're after. Often the dealer can accept 50 or $100 less per month (depending on markup) than the payment quoted--if they're willing to deal.

One benefit of leasing is that in most states you're paying sales taxes on the payment--not on the selling price.

The best leases are those on low depreciating cars--like a Honda Accord or Toyota Camry. Often, other manufacturers will be paying big sales incentives to those leasing, and they're also attractive.

Be careful on mileage, as you can buy miles cheaper on front end than turning the car with too many miles on them. I once had a luxury car lease for 36 months and had to put new tires on my car before turning it in. I also once had a lease car that I turned in early when I hit my maximum mileage (and paid the payments) so I could get it off my insurance.

Another great benefit is that you don't have to worry about what to do with the car when you're through with it. You're not betting on the used car market, as you walk away without any liability if the car's in good shape.

[kitesurfer2]

leasing a car is like renting a home...

[HadEnuff]

Quote:

Originally Posted by kitesurfer2 leasing a car is like renting a home...

In some ways, this is true. There are definitely times when renting makes more sense than buying, and vice-versa. But negotiating a house rental seems simpler to me. You don't start out by negotiating a selling price, and then factor up the monthly rental fee based upon that.

Also, you don't have to try to guess how many hours you will spend in the house, and maybe overpay for hours you didn't use, or get whacked big time at the end of the lease because you stayed in it more nights than you guessed, up front.

So, yes, in some very obvious ways they are similar. But not in any real helpful way, moving forward.

[JOHNNIE36]

I have leased the last six cars except for the last one which we bought. I did that because I think is will be our last car. Some thoughts on leasing:
1. If you drive hard and don't like taking care of cars then leasing is probably not for you. End of lease condition is critical in my estimation.
2. The predetermined end of lease (residual) value is all important in determining your payment. As someone mentioned, good reliable vehicles affect resale value and that is the residual.
3. I always leased vehicles with zero down and did not pay a security deposit.
4. Sometimes it's better to let the dealer tell you which vehicles are offering the best lease deals.
5. I think the sales tax issue is important. On a lease, you pay sales tax only on the part of the car you use (the time).

Getting back to item #!, sometimes it may be in your best interest to have the car detailed before you let the dealer see the condition of your car.

[aja8888]

Quote:

Originally Posted by JOHNNIE36 5. I think the sales tax issue is important. On a lease, you pay sales tax only on the part of the car you use (the time).

Unless you are in Texas (and maybe some other states) where you pay the sales tax on the agreed contract price of the car.