The world of car leasing is one that seems simple on the surface, but underneath lurk many potential pitfalls. Getting the best-possible deal on a car lease sometimes feels like walking a tightrope, which is why we’ve prepared today’s blog.
We are offering up our best tips on how to get to make it across the tightrope and secure the best deal you can.
1. Know the Language
One way that people get lost in their journey to find a good leasing deal is by not understanding the key terminology that they need to know. They don’t know what the residual value of the car lease is, nor the rent charge, disposition fee and other things.
Here’s a quick crash course in important car lease terms you can’t do without:
- Agreed Sale Price – The total value that you and the dealership agreed upon for the vehicle in question. How the lease payments break down ultimately depends on this initial value.
- Residual Value – The amount your lease car is worth if and when you return it to the dealership.
- Depreciation – The reduction in value that your car experiences over time.
- Rent Charge – The main monthly cost of leasing the vehicle, typically tagged onto to the depreciation amount to become part of your monthly payment.
- Capitalized Cost – The value of your car plus any other services or fees that are mentioned within your agreement.
- Gap Insurance – This special insurance covers the difference between how much money you still owe on the car and the current residual value in the event that the car is stolen or damaged beyond repair.
- Disposition Fee – Upon returning the vehicle, the dealership will prepare to store and then sell it as a used car. This involves some costs, and you’ll likely be charged.
- Purchase Option – One of the possible outcomes of your lease is that you will have the opportunity to buy the car outright by paying off the remainder of the price. How much is left depends on what price you initially agreed with the dealership.
2. Factor Additional Fees into Your Budget
The game of leasing is one of added and supplemental fees. This is how dealerships and finance companies make their money. The more that can be tagged onto your lease agreement, the more money they make.
Some of the additions are things you need, but others you might not, so put some time into reflecting on these fees. Some fees that you’re likely to pay include (but are not limited to):
You might have previously only purchased liability-only insurance in which you’re covered against third-party damage.
When leasing, however, you might be required to purchase comprehensive insurance, or it might be called something like “collision coverage.” It covers the car against more eventualities, including fire, theft, or the act of God.
As mentioned above, you might be required to get Gap insurance. Regardless, we think it’s a good idea because in the unlikely event that you write the car off, the gap in value between the depreciated amount and what’s left to pay in the lease is covered, meaning no additional cost to you.
Additional Wear and Tear
Do you have a big family that will be in the car with you regularly? How about pets? Do you drive a lot? If you answered yes to any of these, the lease car is more likely to undergo certain wear and tear that ordinarily would result in punitive measures being taken upon returning the vehicle.
You can buy additional wear-and-tear coverage to help protect you against certain extra wear and tear that you feel could happen. It’s a cheap up-front payment that potentially saves a lot of trouble later on.
3. Shop Around
Car leasing is extremely competitive these days. The market conditions favor the lessee, with innumerable dealership and other companies vying to get your signed up for a new car lease.
Take your time to explore online and offline options. Visit dealerships and see what there is on offer. There’s no need ever to feel pressured by any one provider, no matter how good the deal seems. They will invariably remain patient for a customer if they feel there’s a chance you’ll agree later.
This tip is really an extension of Tip 3. Once you’ve found a dealership or vehicle that you definitely like, you should also try to further optimize the terms in your favor. There are three big things you on which you have room to negotiate.
- Agreed Sale Price – As mentioned above, the agreed sale price is the starting point from which other calculations about your monthly lease payments will be made. This is the first point you should strongly negotiate as far down as possible.
- Annual Mileage – This is one area that dealerships end up making good fees from lessees. Since many people, especially first-time lessees, underestimate their annual mileage, they can end up getting charged per mile for anything over the agreed annual limit. Leasing companies will try to low-ball you, but always negotiate for more miles at the rate you can afford.
- Interest Rate – This forms a significant part of your monthly payment. Bringing down the interest rate as much as possible will help you get a better deal. Boosting your own credit score gives you more negotiating power on this figure.
5. Meticulously Read Your Leasing Conditions and Options
One way that a leasing deal can go south is when lessees haven’t properly understood the terms. Many are caught out by conditions regarding early termination of the lease, transferring it to someone else, what kinds of wear and tear are covered, mileage limits and so on.
It’s absolutely crucial that you know how every stage of the lease is going to go before you sign it.
You’ll need to know:
- What wear and tear is covered and what will be charged to you upon return
- Your options and the costs involved for returning, purchasing or exchanging the vehicle at the end of the lease
- The exact terms and potential costs of exiting your lease early, and the possibility of transferring it to another lessee should the need arises
- Whether or not you’ll have to pay a disposition fee when returning the vehicle
- How much you would be charged per mile should you exceed the mileage limit
- Whether the rate includes gap insurance and/or other coverage you might need
6. Don’t Let Harm Come to the Vehicle
A final way to ensure that you always get the best deal on your car lease is to drive it and take care of it as though it was someone else’s car. The truth is, anyway, that a leased car is someone else’s —the dealership’s or finance company’s vehicle. You should treat it as such.
Don’t engage in any risk-taking behavior with the car like dangerous high-speed passing of other vehicles or racing with other drivers. You should also avoid making any kind of modification to the car, even apparently cosmetic or reversible ones. To make such alteration is always to risk some part of the car’s overall integrity.
Stick to Budgets and Plans, but Never Settle for the First Option
In conclusion, in order to get the best-possible deal on a car lease, you’ll have to put in the work yourself. It needs research, patience, the careful reading of terms and conditions, and the critical capacity to compare different deals. It seems a lot of work to start with, but you’ll be glad you did it when you end up with better lease terms than anyone else you know.
Take your time, explore the deals in front of you, and stick to whatever budget or plan you initially make for yourself. When it comes to leasing, there’s always room to adjust as leases conclude and new ones are prepared, and those days come around much faster than they would when buying a car conventionally. Leasing can be a good path to driving cars that are otherwise out of your budget range, but it requires careful navigation, proper planning, and going into any agreement with your eyes wide open.