The Most Common and Costly Mistake When Leasing a Car
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.
3 Steps Every Car Buyer Needs to Take to Save Maximum MoneyThe key to getting the best deal is to gather price or lease bids from as many local dealers as possible. Then shop that best price around until no one can beat it. Here are the steps:
Step 1 Get Prices From My Trusted NetworkSelect the vehicle you're interested in to see if there are local dealers in my network who will provide you with their best upfront price. You will get direct access to an internet sales manager who you can further negotiate with online (no need to visit dealership).
Step 2 Get Prices From TrueCar / CarsDirectTrueCar, and CarsDirect are my top 2 online price quote recommendations. These services show you pre-negotiated prices from dealers closest to you - and the deals are usually pretty decent. But remember, you can still negotiate further.
Step 3 Complete my ChecklistFollow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan
Each week, I'll keep you up-to-date on the latest car deals and news that might affect your purchase. This includes...
- Best Rebates, Incentives, and Lease Deals
- Latest Car Buying Scams and Tricks
- The Best & Worst Time to Buy a Car
- Which Cars You Should Avoid