When you’ve decided leasing a vehicle is right for you, the game isn’t over. There’s no need to accept an advertised deal as your bottom line price and there are many ways a lease can cost more than you expect. It’s easy to stumble when dealing with salesmen. You shop for a car every few years, at most. They lease and sell every day, and know where to squeeze every dollar. There’s much to misunderstand about vehicle leases. A little knowledge helps you navigate the field while paying the lowest price.
Is your lease decision sound?
The fundamental difference between buying and leasing a car comes down to what you’re paying for. When you buy, you’re paying for the car, as well as paying for financing, in terms of interest. When you take a lease, on the other hand, you’re paying for the car’s depreciation, along with other fees and costs. The lease-versus-purchase decision is complex and personal. If it’s important to you to drive a new car every few years, or if business use cash flow is important, then leasing may be a better option. When owning an asset or paying the least per mile are priorities, then buying it probably your best bet. In practice, you’ll probably have a unique blend of needs, so there’s no single best answer. Consider your decision from more than one angle.
Negotiate the lowest price first
There are things that you can negotiate in a car lease, and things that you can’t. Purchases have similar factors. However, the car’s purchase price is always negotiable. You may not think this matters if you’re planning to lease, but it does. True, you’re not paying the purchase price on the car, but you’re very concerned with the gross capitalized cost of the vehicle. Also expressed as “gross cap cost,” some dealers may underplay its importance, but it’s the number upon which your lease rate is based. Simply, the lower the gross cap cost, the lower your lease payment. It’s better to negotiate the lowest price you can for your car before you even mention leasing, since your salesman may go lower if there’s a purchase at stake. It’s a matter of playing your cards close to your chest.
Don’t forget to compare
When you have a number in mind for a lease payment, you could walk into a single dealership and walk out with a lease. Great, right? Well, perhaps there was a better deal, and you’ll never know. Buying a car can be an emotional decision for anyone and new wheels today may be an overwhelming temptation. If you take the first deal, you really won’t know if you have a good deal. If you hope to drive a new car home, you give up your walk-away power. That’s your most important negotiating tool. You’ll rarely ever lose a negotiation by saying no. Car leases are no exception, so compare offers to learn the market.
Overpaying up front
Upping your down payment is a sound strategy for a purchase, since you then pay less to finance a smaller balance. Remember though that when you lease, you’re paying for the depreciation of the vehicle, not the vehicle itself, and you’re making payments on the gross capital cost. If your down payment isn’t reducing this amount — and it usually doesn’t — then there’s no real value to you. In fact, in some cases you may be able to negotiate a lower down payment or no down payment at all.
While leases may seem like a more affordable way to get into a new car, it’s a short term advantage. Leases can get you behind the wheel for less money today, but you’ll likely pay more in the long term. Consider that you will have a lease payment every month you have a vehicle. When you buy, you will own the car outright one day, and after the payments are made you can bank that amount. Again, there are other trade-offs. The leasing driver will likely have a new car before the owning driver pays off, so it’s important to know where your priorities are. If you’re talked into a lease at the dealership, you’re likely taking a bad deal.