Leasing a car is a good choice if you are temporarily at a place or would prefer getting a new car every two or three years. But there are some basics that you must have your finger firmly on to make the best decision. Here, we have put together a list of auto leasing basics so that you can get a great lease deal.
Always review the lease offers in your area. Manufacturer-backed ones may be your best bet especially if you are someone who does not enjoy negotiating. However like in all lease subjects, review the details carefully. Especially, the bit on down payment.
In case you are going in for negotiations, always remember each auto lease has three parts – what is negotiable, what is non-negotiable and what may be negotiable depending on various factors.
- Negotiable: The Capital Cost is negotiable. This is basically nothing but the vehicle’s selling price. So negotiate like you are buying and ensure that its set at or below the average price that other buyers pay for similar cars in the market.
- Trade in Value: This kicks in if you are trading in a car for a new lease car. Again, this is negotiable too.
- Money Factor: This is the interest rate on a lease. Expressed as a decimal number, this depends on quite a lot on your credit score. Dealers may mark it up for additional profit purposes. In such situations, ask them for a lease based on their “buy rate.”
- NonNegotiable: The Residual Value is non-negotiable; it is the agreed upon value of the car at the end of lease term as is the Acquisition Fee also called the bank fee or administrative fee, that leasing companies charge to arrange the lease.
- Maybe Negotiable: The Cap Cost Reduction may be negotiable. This is essential, any payment, trade-in credit or rebate amount which actually reduces the total amount being financed during the lease. It has the effect of reducing the monthly payment amount, and it is best kept to a minimum since it is not typically reimbursed by insurance in case of a mishap. Also in the maybe a negotiable category is the Buy-Out Price. This is handy if you want to buy the car at the end of your lease period. In most cases, leasing companies can set the buyout price lower than the residual amount. Disposition Fee is the third in the maybe a negotiable category. A fee charged by the leasing company to match the costs of cleaning up and selling the car your lease ends – this can be negotiated or waived off if you buy the car or lease another car of the same brand depending on the lease policy.
On the basis of the above, you can take an informed decision on investment in a lease deal.
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