To lease a car, you only need to make a down payment followed by affordable monthly payments for the entire term of the lease. Monthly payments are typically lower compared to buying a car, per Consumer Reports, but you should still treat the process as if you were buying a car outright. After all, the choices you make will affect your budget and finances, at least for a few years to come.
If the idea of leasing a car sounds right for you, here’s how to get the best car lease deal.
1. Go at the Right Time
If you want a good deal on a lease, you’ll need to go at the right time. One of the best times to get a lease is when a new car model comes out and during long holiday weekends, such as President’s Day, Memorial Day, July 4th, Labor Day, Thanksgiving and Christmas.
Car models are released throughout the year, but most car manufacturers release new models in March or September, according to Leaseloco. Leasing is also cheapest at the end of the month or quarter, as dealers want to keep up with quotes and will be more open to offering a discounted rate.
2. Check Your Credit Report
People with the best credit scores often get the best deals on car leases. You can still lease a car with a low credit score, but it’ll cost you more.
Get a free copy of your credit report from each of the three major credit reporting agencies – Experian, Equifax and TransUnion – and check for errors or inaccuracies before beginning the leasing process. If your credit score is low, work on improving your score before going to the dealership.
3. Comparison Shop
After identifying the car you want, compare offers for the same vehicle from several dealerships to see which one is the cheapest. To ensure that you get the best deal for your money, take the time to compare sales prices – this will help you identify cars of your chosen model that are within your budget.
Once you think you’ve found the best offer, approach dealerships and get a quote. You can also contact dealers by phone or via email without feeling pressured to make a decision at the dealership.
4. Look For Leasing Specials
From time to time, manufacturers might advertise special leasing offers for cars that aren’t selling as fast as others. Typically a lease special will advertise a reduction in down payment or lower monthly payments. It’s certainly worth checking out these offers, but make sure you do your research.
To find out whether you’re getting the best deal, look closely at the drive-off fees. Drive-off fees are the amount you must pay to begin a lease — this includes a down payment and security deposit.
5. Choose the Right Mileage
Most leasing contracts have an annual mileage limit of 10,000 to 15,000 miles. Pay close attention to this number. If you exceed the limit, you could be charged as much as $0.30 for every mile, according to Kelley Blue Book. This means you’ll pay $300 for every 1,000 miles over the limit.
You can change the mileage limit while negotiating your lease, but you can’t make any changes once you sign the contract. While raising the mileage allowance could increase your monthly payments slightly, it might be better than paying a large penalty for going over the mileage limit.
6. Understand the Types of Leases
Choose a car lease that fits your needs. Here are common types of leases:
- Closed-end lease: a closed-end lease is the most common type of lease and has a set term length. You won’t have to pay the difference in market value at the end of the contract. However, you’re responsible for the condition of the vehicle once you return it to the dealership.
- Open-end lease: There’s no specific end date. Instead, open-end leases have a window of time to turn in the car without paying penalties. The biggest downside of this type of lease is that you have to pay the difference between the car’s estimated value at the start of the lease and its residual value (what the car is worth at the end of the lease term) when you turn it in.
- Used lease: Most leases are for new vehicles, but leasing a used car is another option.
- Single payment lease: You make all of your monthly payments upfront with a single payment lease. This is typically a better option if you have a lower credit score and you could save more money than if you make payments over several years.
- Subvented lease: Subvented or subsidized leases are similar to closed-end options, but they provide discounts if you have a higher credit score.
7. Choose a Car that Holds its Value
When you lease a car, you’ll have to pay for its depreciation when you return the car. A higher residual value means the car will depreciate less over the lease term, and your lease payment will be lower.
Residual value is shown as a dollar amount, but it’s calculated as a percentage of the car’s MSRP, or the Manufacturer’s Suggested Retail Price. For example, if you lease a car with an MSRP of $30,000 and a residual value of 60%, it’ll be worth $18,000 after three years.
The car dealer determines your monthly payment based on the car’s capitalized cost minus its residual value. You can try to negotiate a higher residual value and a lower car price, and dealers may also be willing to negotiate additional details, such as:
- Lease period.
- Mileage limit.
- Buyout price.
- Money factor, which is a representation of the interest rate (multiply the money factor by 2,400 to see the number represented as an APR).
- Down payment.
- Trade-in value.
According to Experian, dealers may be more willing to negotiate lease terms when they’re trying to clear out old inventory before the arrival of a new model.
9. Make Sure Payments Fit Your Monthly Budget
A budget can help you during lease negotiations by giving you a dollar limit on what you can afford.
The average lease payment for a new car is $586, per Experian’s State of the Automotive Finance Market report for the second quarter of 2023. Although monthly lease payments are often lower than loan payments on new vehicles, which average $729 per month, taxes, registration, insurance and other fees can add up.
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This article originally appeared on GOBankingRates.com: 7 Things To Consider Before Leasing a Car To Get the Best Deal
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