Know What Car You Want
If you’ve been following the advice on this blog you would have researched the car you’re interested in buying. You’ll know your credit score or have a rough idea of what it is.
When you first walk into the showroom, you should be greeted by a sales person. If you’re not ready to make a purchasing decision for a few months be up front with the sales rep. They’ll provide the purchasing numbers for the month (or weekly promotion if offered by the manufacturer) that may not be valid if you’re buying in 3 months.
If you are ready to buy today, let them know that. You’d be surprised at the flexibility that dealers have when you walk in ready to buy.
When the sales rep introduces themselves, let them know that you’re interested in leasing a vehicle. If you’re ready to buy today let them know that you’ll lease today if you can get the right deal.
Buyers Advantage
When you go in knowing what you want and are ready to buy you have a number of advantages.
- You can walk away if you don’t get the price you’re looking for.
- You can continue to shop around to find a dealer that can meet your needs.
If you’re at this stage of the buying process you should be educated on how leasing works. You’ll know about the car you want and the average selling price of what you’re after.
Getting Ready To Negotiate
To ensure that you get the best deal on the lease you’ll need to be negotiating on the sale price of the vehicle, not the monthly payment. Some dealers may tell you that a leased vehicle’s price cannot be negotiated but that’s simply not true.
Unless it’s a hot selling car that’s in short supply, there is room for negotiation. You just have to be willing to ask.
One of the best ways to know what to expect to pay for a vehicle is to do research before hand. Using sites like AutoTrader and Edmunds will allow you to research selling prices of vehicles in your area.
Dealers are not able to negotiate on the money factor (interest rate) and residuals. Those numbers are set by the leasing company. Some dealers work with multiple leasing companies, so you can ask if they have another company that may offer a better term. A dealer will have flexibility on the selling price of the vehicle, which is where you’ll be negotiating.
Ensure you ask the sales person about dealer incentives, manufacturer rebates and any other available rebates to lower your cap cost.
Trade In
If you’re choosing to trade in a vehicle, expect to get less for it than you probably hope you will. There’s a misconception that car dealers are “stealerships” because of consumers not getting what they believe their trade in is worth.
There are a number of factors that affect the trade in value of your vehicle. They are outline in our article How To Determine The Trade In Value Of Your Vehicle.
You’ve Negotiated The Selling Price, Now What?
After you’ve had the conversation with the dealer and agreed on the sales price, the next step is to have them determine your monthly payment. While most salespeople can make these calculations, they may need to check with the finance manager or sales manager before presenting you with the price.
If you’re doing your own calculation make sure you use the same cap cost, cap cost reduction (trade in or down payment), money factor (interest rate), residual value and term (months on your lease).
If you notice a discrepancy, have them walk you through the numbers to see if there was a fee that was missed.
Additional Fees
Most dealers charge an admin fee. This is anywhere from $249 and as high as $2,000. The dealer fee usually includes things like wheel locks, VIN etching, a full tank of gas and a few other items.
While most dealers will tell you this fee is non negotiable, if you push enough or are prepared to walk, they will typically remove the fee. They may also drop the purchase price to offset it.
Advertised Deals
If a vehicle manufacturer has advertised a lease deal, chances are that there isn’t room to negotiate. These advertised deals are usually made by the manufacturer and dealer to give you the best possible price.
With advertised deals, usually everything is included in the terms. That includes leased price, money factor, residual, term as well as the vehicle year, make, model and style.
When you see an advertised deal that is too good to be true it’s because the manufacturer has inflated the residual value or is offering factory discounts that the dealer simply cannot give themselves.
When You Don’t Know What Car You Want
If you’re looking to lease but are unsure of the type of vehicle you want this is where a sales person will come in handy. They should have your best interest at heart and will be able to recommend a vehicle based off of your individual needs.
There’s no issue giving a sales person a “range” you’re comfortable with paying but it’s recommended that the range you give is a bit lower than what you’re ACTUALLY willing to pay.
For example, if you have a monthly budget of $450, it’s recommended to let the sales person know your budget is $425. This will give you a bit of wiggle room in case you find a vehicle that’s priced just outside of what you’re able to afford. It also let’s the dealer know what vehicles will fit in your price range.
Be Prepared To Walk Away
If you sense the sales person is playing games with you or if the dealer is trying to add on fees that shouldn’t be there, simply walk away. Unless you sign a contract there’s nothing holding you in that chair.
You hold the power in the negotiation. You’re the one buying the vehicle and you have the ability to get up and walk away if you aren’t happy.
Summary
Negotiating a lease is similar to negotiating for a financed vehicle. The main focus for you should be to decrease the selling price of the vehicle in order to get your payments lower.
A few other useful tips:
- Negotiate based on the selling price, not the monthly payment
- Don’t let a dealer tell you lease prices are non negotiable
- Research to see what the vehicle is selling for across the state/province you’re in
- Know your trade in value
- Be prepared to walk away if the negotiation isn’t going in your favor
- If you sense the sales person is playing a game, be prepared to walk away
- Don’t agree to extended warranties, security devices, dirt deflectors, scotch guarding etc.
- Do consider the service maintenance plan (all scheduled maintenance is covered) and Wear Care (for excessive damage on lease end)
- Never sign a lease agreement until you’ve settled on the selling price
- Double check the lease payment by working with the numbers you have: residual, cap cost, money factor, cap reductions etc
