There is a lot of appeal to leasing a car. For example, with a lease, the monthly payments are less than financing a new car purchase; the down payment is often minimal; the vehicle is typically brand new and covered by a manufacturer's warranty; and it puts you on track for new car in a short time. While there are distinct benefits to leasing, there are also numerous potential pitfalls. Keep in mind that there is no free ride. But our tips can help keep you on the right track.
To drive a good deal:
- Negotiate the vehicle's purchase price as if you were going to buy the car. Only after you have a firm price should you bring up leasing. After all, it is a form of financing.
- The mileage limit, down payment, and purchase-option price can also be negotiated. Remember that, just as with a loan, the more you put down, the less your finance charges will be.
- Negotiate the lease money factor, the number used by some lessors to determine the interest (or rent) portion of the monthly payment.
- Unless it's included with the lease, buy Guaranteed Auto Protection (GAP) insurance to protect yourself in case the vehicle is stolen or totaled in an accident.
- To keep your monthly payments as low as possible, look for cars that don't depreciate faster than average. Consumer Reports' owner-cost Ratings are included in the model pages with detailed information on depreciation and other factors.
- Avoid leases that extend beyond the car's factory warranty. After all, that protection is one of the key appeals of a lease.
- Note any end-of-lease procedures and fees (such as returning the car with nearly new tires). Make sure the policies and fees are clear and fair.
- Buy extra miles up front if you expect to run over the standard allotment. You can often have the money spent on additional, unused miles returned at the end. Any mileage overage will come at an increased rate.
- If applicable, make sure your trade-in is deducted from the leased car's capitalized cost.
- If you're considering buying after the lease ends, first make sure the vehicle is worth at least the purchase price. That often won't be the case if you had entered into a subvented lease, for which the automaker artificially raised the residual value. If the vehicle is worth less than the buyout price, try bargaining down the price. If you can't, walk away.
Leasing is not for everyone. But for those customers who prize being in a new vehicle for a specific period of time with fixed ownership costs, it can have real appeal. Just be sure you understand how it works going in and negotiate.