It is a common misconception that car lease prices are not negotiable. Leasing can be a good option for many people. When you lease a vehicle, you are basically agreeing to rent it. A lease agreement usually requires a down payment, the lease term (for example 36 months), and a mileage cap. Leasing is also dependent on your credit score, similar to a finance agreement. When determining the best lease deal on a vehicle, keep in mind the total cost of the lease, and if a lease is right for you.
The cost of the lease is the total package, or the total amount of money you will be spending on the lease. This includes down payment and monthly payments. Do not be fooled. This amount is negotiable, just as the purchase price of a vehicle is. Do your research to see what vehicles have lease deals that fit into your financial parameters. Do not be tempted to have only one vehicle option, or the salesperson will know this, and the negotiations on the lease will be on their terms, not yours. If you let them know up front that you are looking at the deals for different vehicles, they will know that you have other options and will be more open to working with you.
When you lease a vehicle, the lease will have specific limitations on the mileage that is allowed to be on the vehicle at the end of the lease term. An example of this is 36,000 miles and a three year lease. You can opt for more mileage in the lease agreement, but this typically comes at additional expense. If you know that you will not be able to limit the mileage of the vehicle to the set amount dictated by the lease, negotiate for additional mileage as part of the lease agreement. This will save you hundreds, even thousands of dollars in penalties at the end of the lease.
A variety of lending institutions offer leases, including credit unions, community banks, and online lending institutions. Shop around just as you would if you were looking to finance a vehicle instead of lease it. Contact your personal banking institution to see what they can offer you. Many employers offer resources and partnerships with lenders that might be a good fit for you. By shopping around, you can ensure you get the best lease deal available to you.
By approaching a lease with confidence and armed with research, you can ensure you get the best leasing option available. Dealers act as agents for many leasing companies, and by researching and comparison shopping, you ensure you come to the dealership on an equal playing field.
Are Car Lease Prices Really Cheaper than Buying?
Rising new car prices have led many people to consider leasing a vehicle because it does offer certain advantages:
- Low down payments - sometimes no down payment
- Lower monthly payments
- Sales tax is only paid on the car's value at end-of-lease, not the full Manufacturer's Suggested Retail Price (MSRP) To consider if car lease prices are cheaper than owning, here is a comparison to buying versus leasing in a three-year contract. Buying a New Car Assuming you accumulate 12,000 miles per year on a three-year loan for $20,000 at six percent interest, here are your first year costs:
- Down Payment: $3000
- Monthly Payment: $608 ($7,296 over 12 months)
- Insurance per year: $1,140
- Maintenance and repairs: $200
- DMV fees: $400
- Total cost to buy in first year: $11,736
Leasing a New Car
Leasing may allow a consumer to obtain use of a car without a great financial impact. You will be paying less down and lower monthly payments than if buying the same car. Here are the first year costs:
- Down payment: $1,000
- Monthly payment: $350 ($4,200 over 12 months)
- Insurance: $1,380
- Maintenance and repairs: $200
- DMV fees: $400
- Total cost: $7,000
Your out-of-pocket expenses for a lease car deal are $7,000—far less than the $11,736 it will cost for buying the same new car. One factor to note is the insurance costs for leasing a car are normally higher than that for buying a car. Also, when comparing leasing costs versus buying, tax considerations also weigh in. Many consumers can deduct leasing charges as legitimate business expenses, thus writing off the entire cost including all maintenance and repair fees.
Many businesses that lease vehicles find the opportunity to rotate in a new model every couple of years as an attractive and value laden aspect associated with leasing. Buying a vehicle, whether as an individual or as a business, will one day require disposal of the car and may necessitate some type of cost.
Furthermore, leasing a vehicle has certain warranty advantages that do not affect the consumer's pocketbook. Many lease deals include maintenance agreements that have the consumer coming out on top with total lower costs. The disadvantage with leasing a vehicle versus ownership is the fact after a car has been paid off, an owner can keep the car, without the burden of monthly payments that a leased car still will have.