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The Most Common and Costly Mistake When Leasing a Car

Auto Leasing MistakeLeasing can confuse even the most educated car buyers. A lot of people assume leasing is completely different than purchasing a car, when in fact, it's simply a different method of financing.

When you lease, the vehicle is purchased by the leasing company at the price you negotiated. Same thing when you get a car loan - the vehicle is purchased by the bank or whichever company you used to get financing.

The bottom line: Whether you lease or buy, a car is being purchased from a car dealer and you will be making payments based on that selling price.

The biggest mistake people make when leasing is to not negotiate the price of the car.

You would be surprised to know how often car shoppers fail to negotiate this very important piece of the puzzle. Dealers of course love the confusing nature of leasing because they can sometimes get away with charging full MSRP for the vehicle.

Since the majority of a lease payment goes toward paying the depreciation cost, the lower you negotiate the price, the less depreciation cost you will incur. If a car has an MSRP of $25,000 and you're able to negotiate $2,500 off the price, that would amount to a savings of nearly $70 per month on a 36 month lease.

You should always aggressively negotiate the price of the car before you lease. This is the case even when there are special lease deals being offered. Those lease deals usually involve a low money factor, a high residual value, and a selling price (or capitalized cost in leasing terms) that is pre-set, but negotiable. (see: Car Leasing Terms Explained in Plain English)

Before signing a lease, use our car buying guide to get the lowest price on the vehicle of your choice - then you can shop around for the best lease terms.

My Recommendation for Car Shoppers

TrueCar No-Haggle and Edmunds Price Promise are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan

Gregg Fidan

About: Gregg Fidan

Gregg Fidan + is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.

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