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Negotiating the Deal

"Leasing is a way to drive a nice car and make amazingly low monthly payments. It is also a way for the friendly folks at the local car store to take you for a long and mysterious ride at the end of which you say good by to a whole lot of money."

Michael Flinn -- How to Save Big Money When You Lease a Car

Now we come to the most unpleasant part of leasing a car: negotiating a deal.

There are two strategies to consider when approaching a dealer about a specific car. The first strategy that is recommended in many car buying books, says that you should not tell the dealer that you wish to lease the vehicle until after you have negotiated a reasonable purchase price. This strategy in effect prevents the salesman from using the lease terms to hide the true sales price of the car. However, this approach has a disadvantage. Since the residual and factor must be obtained from the dealer, you must wait until the very last step in the negotiations to state your intention to lease. Hence, you must invest a lot of time (and frustration) before learning if the lease rates are reasonable, or whether or not you can afford the payments. Furthermore, without the residual and money factor, it is impossible to compare make and model based on the total cost of the lease.

One way around this information dilemma is to work with more than one dealer for the same make car. Contact the first dealership and ask them about the lease program offered by the manufacturer on the models that you are interested in. Be sure to specifically ask for the residual value and the money factor. Remember, a specific car will have different factors for 24, 36, 48, and 60 month leases. It's always a good idea to ask the salesman to write these figures down for you. This prevents the unscrupulous salesman from verbalizing inaccurate numbers only to later declare "an honest mistake" was made if and when you attempt to strike a deal.

Once you have the factor and residual for the models you are interested in, you are free to negotiate with competing dealerships for the same car without stating your intent to lease until you are ready.

An alternative strategy is to ask the dealer about their lease program up front. Once you have the specific terms of the lease program being offered, use LeaseTips to evaluate the lease and compare it to other lease programs. Finally, prepare for the final round of negotiations by calculating payments for a range of cap costs.

With either strategy, expect a significant amount of "maneuvering" from the salespeople concerning the lease agreement numbers. Some dealers will insist on negotiating only on payments and will not share cap cost, and factors with you. Your best weapon against this tactic is knowledge. Use the information in this web site to check and confirm every proposed offer to make sure the numbers add up. A recent visitor had an experience where he was negotiating the cap cost for a lease on a new car. The dealer proposed a cap cost that was acceptable to both parties. A few minutes later the salesman presented paperwork with a payment that represented a cap cost of $1000 higher than the agreed upon figure. Because the LeaseFacts reader was familiar with the numbers and was able to calculate the lease payment, the "error" was immediately spotted. When the salesman was questioned about this discrepancy, he responded arrogantly, "These figures are right. We calculated them with our Lease Computer." When pressed further, the salesman challenged, "How do you know what the payment should be? Do you have a Lease Computer?" "No. But I do know how to calculate a monthly payment." Five minutes later the payment was reduced to the correct amount. This true story drives home the point: when negotiating a lease, knowledge is power and you shouldn't be afraid to use it.