Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
When someone leases a car, typically they can make a lower monthly payment than if they’d purchased the vehicle with a loan. That’s a key reason why leasing can be so appealing for many consumers.The lease lasts for a predetermined number of months and miles. At the end of the time period, the vehicle is usually returned to the dealership. Alternatively, if there’s a purchase option, the person leasing it might decide to buy the vehicle outright.If, after mulling over whether to buy or lease a car, you decide to lease, you’ll have to negotiate with a dealer to get the vehicle and lease terms you want. Below we provide eight tips on how to negotiate a car lease agreement.
Can You Negotiate a Car Lease?
Can you negotiate car lease contracts? Yes, you can negotiate a car lease. You can negotiate the down payment, rent charge, and acquisition fees. Negotiating over mileage on lease contracts is another area you may negotiate, among other areas open to negotiation.
Are There Reasons Not to Negotiate a Car Lease?
You are not required to negotiate a car lease, and leasing companies have no obligation to entertain any negotiations. You wouldn’t negotiate a car lease if you have no interest in leasing. You may have compelling reasons to negotiate a car lease if you’re interested in leasing.Leasing is a viable financing option, and negotiating a car lease can help you get leasing terms that are right for you. If you’re in the pro-leasing camp, you may have no good reason to shy away from negotiating.
How Do You Negotiate a Car Lease?
How to negotiate a car lease is up to you, but the main thing is having a dialogue and asking whether the finance company can offer better terms on the lease. Understanding the leasing process can help you negotiate lease terms that are right for you.
What Can and Can’t You Negotiate?
Below we highlight areas you can negotiate when negotiating auto leases:
What You Can Negotiate
Here are elements you may negotiate with a car lease:
Acquisition fee
Disposition fee
Down payment
Early termination fees
Gross capitalized cost
Mileage allowance
Mileage fee or charge
Rent charges
What You Can’t Negotiate
You may not be able to negotiate the residual value in the leasing contract. The residual value is what the leasing company estimates the car will be worth at the end of the leasing term. Another area you may not be able to negotiate is the penalty of what happens in the event of default. Failing to make required lease payments when due can lead to car repossession.
8 Tips for Negotiating Auto Leases
Here are eight tips for negotiating a car lease:
1. Know the Terminology
Car leasing lingo has some different terms than the language used in buying or selling a car. For example, instead of a buyer and seller, there’s a lessor (the company leasing the vehicle) and a lessee (the person taking out the lease).Typically, lessees prefer a closed-end lease, meaning one in which the two parties agree (from the start of the contract) on an estimate of what the future value of the vehicle will be. So, if the lease ends and the lessee returns the vehicle, they won’t owe more money because of depreciation, even if the vehicle is worth less than estimated in the original contract.Residual value/future value is an estimate given by the lessor to share how well a car is likely to maintain its value during the lease period. A short-term car lease can be anywhere from 12 to 24 months, while a long-term lease can be up to 60 months.Other terms you will likely hear include:
Lease acquisition fee: This is like an origination fee on a home loan. It’s an upfront fee that covers the cost of checking your credit scores, setting up the lease, and so forth.
Lease disposition fees: These fees may be charged if you return the vehicle, and it’s intended to cover the costs of getting the vehicle in shape for resale.
Rent charge: This is similar to the interest paid on a car loan. The rent charge is part of the monthly fee you pay as a privilege of driving the leased vehicle.
If you’re ever uncertain about what a term means, ask or investigate. You can’t negotiate without understanding the terms of the discussion.
2. Read the Fine Print
Lease terms can vary by dealership and by contract and it’s important to be clear about what you’re agreeing to in yours.Overall, a lease resembles a car rental but for a longer amount of time — typically two to four years. You’ll pay to use that car for the agreed-upon time period and then, at the end, either buy or return the vehicle.A typical lease allows you to put 10,000 to 15,000 miles on the vehicle each year. If you go beyond those limits, there is often a per-mile fee charged.All of that information should be listed in the agreement, along with the car’s value — both the current one and its end-of-lease projections — the rent charge, amount of money that needs to be put down, penalties for late payments, and other fees, including for excessive wear and tear or damage. Your contract may also feature early termination fees if you get out of your car lease early.
3. Ask About the Cap Cost
“Cap cost” is short for the vehicle’s “capitalized cost” and, as lessee, you’d want this number to be as small as possible. Why? Because it’s the price of the vehicle.It’s important to know that, with a leasing deal, when a consumer negotiates for a lower payment, the dealer may agree. But the catch is that, rather than lowering the price, they would probably extend the payment period, which doesn’t necessarily benefit the lessee.Here’s an example. Let’s say a dealer offers a 36-month lease with a monthly payment of $400 (36 x 400 = $14,400). You want to reduce the payment a bit and so the dealership lowers it to $375. But the lease is now 42 months long (42 x $375 = $15,750).So, rather than negotiating the payment, negotiate to lower the price of the vehicle. To reduce this figure, you may be able to apply to put money toward the lease or trade in another vehicle. Doing so is called a “capital cost reduction.”
4. Leverage Interest Rates/APRs From Other Dealers
Search online for the make and model you want and contact dealerships to get specifics about rent charges, APRs, and special offers. Then pick the dealership where you want to start negotiations. During a car lease negotiation, don’t hesitate to bring up what you’ve learned about other dealerships and what they’re offering.Some dealers may tell you that rent charges aren’t negotiable, but others might be more willing. What’s important: Know what dealerships, in general, are offering, and make sure that the contract you sign is reasonable.
5. Be Clear on Mileage
Take an honest look at your mileage needs and compare that to what’s offered in the lease. If you don’t put lots of miles on your car, then you could ask for a lower monthly payment in exchange for a lower annual mileage limit. If, on the other hand, you put plenty of miles on the odometer, you can request a higher limit without an extra charge. Dealers don’t have to agree, but that’s all part of the negotiating process.
6. Look at the Manufacture Date
This is different from the model year. The older the manufacture date, the longer the vehicle has been sitting on a lot somewhere. For example, a car can be a 2023 model but have been manufactured in 2022. To get this information, look at the vehicle identification number or VIN.The tenth digit will indicate the date of manufacture with different manufacturers using different systems to indicate what that means.
7. Let the Lessor Know if You Plan to Buy the Car
If you plan to purchase the vehicle once the lease period expires (known as a lease buyout), you may be able to negotiate the buyout price, lowering it beyond what the market value is expected to be. That will save you money when you’re refinancing the vehicle in your own name. If you’re not ready to buy the vehicle, extending a lease on a car may be an option if the leasing company agrees to an extension.
8. Leverage Your Trade-In Vehicle
When determining how to negotiate your car leases, consider the vehicle that you may turn in as part of the deal. The dealer will let you know the value of your trade-in (a number you can negotiate, so come armed with info from Kelley Blue Book or another trusted industry source) and those funds can be applied to the lease to reduce your monthly payments.Recommended: How Does Leasing a Car Work?
Lowering Your Car Payments With Auto Loan Refinancing
Refinancing an auto loan may provide you with a lower monthly payment. Can you refinance your car lease? Yes, you can refinance a car lease by taking out a lease buyout loan. This gives you ownership of the vehicle and requires that you make regular loan payments rather than lease payments.Leasing vs. buying is a form of financing that allows you to operate a car in exchange for paying a monthly rent charge and fees. Car leases typically include lower monthly payments than auto loan financing. One of the downsides to having a car lease is you pay monthly fees without receiving any equity in return. Refinancing a car lease promotes ownership.
Auto Loan Refinancing Rates
Whether you have a car loan or lease, you may qualify for auto refinancing. Auto refinancing promotes car ownership and can provide you with a lower monthly payment.If you want to refinance your auto loan, Lantern by SoFi can help. Just fill out one form to compare auto refinance rates.Check your personalized rates without impacting your credit score.*
Frequently Asked Questions
Can car lease prices be negotiated?
Can you negotiate a down payment on a car lease?
How do you negotiate for a good deal on a car lease?
Photo credit: iStock/Antonio_Diaz
LCAU1222007
About the Author
Kelly Boyer Sagert
Kelly Boyer Sagert is an Emmy Award-nominated writer with decades of professional writing experience. As she was getting her writing career off the ground, she spent several years working at a savings and loan institution, working in the following departments: savings, loans, IRAs, and auditing. She has published thousands of pieces online and in print.
