Tips for Leasing a Car

On the flip side, leasing means "restricted usage", i.e., almost all agreements put a restriction on the number of miles a vehicle can be driven. Secondly, termination of the agreement can be very expensive, sometimes so costly that even the insurance is unable to cover it. Following are some tips you need to follow before you decide to lease a vehicle.

After you have zeroed in on a particular model, do some more market research, this time on the number of dealers who stock this model. If there are a lot of dealers, you can negotiate for a good deal. Next thing to do is to determine the market value of the vehicle. Once you have these figures with you, it will make negotiating fairly easy.

Negotiation with the dealers before signing the lease is very essential, as it will help you save a lot of money. However, before negotiating, be aware of how the dealers set the monthly payments. In the agreement, the price of the vehicle is known as the capitalized cost, and the residual value is the value of the vehicle when the lease ends.

Monthly payments are determined when the residual value is subtracted from the capitalized cost (to which taxes, interests, dealer fees, and closing fees are added). The value which is left is actually the depreciation value of the vehicle, and it is this which is divided into the monthly payments.

When on the negotiation table, the first thing that you should ensure is that the length of the agreement is well within the warranty period of the vehicle, so that you do not have to pay for any of its repairs or maintenance.

Secondly, negotiate on both its capitalized cost as well as its residual value. See to it that the dealer offers you the highest residual value and the lowest capitalized cost. Also, do not let the dealer include contract fee, security deposit, registration fee, etc., in the monthly payments as it means higher interest rates.

During the negotiation process, quote the monthly payment rates which the other dealers are offering you to get a better deal. Interest rate, security deposit, dealer fees - anything and everything is negotiable. One very important thing that should be discussed while negotiating is the early termination penalty, otherwise it can cost you a lot later on.

After the negotiations are complete, make a written record of whatever that is agreed upon by you and the salesperson. You can compare these figures with the agreement and ensure that "everything" is as it was promised.

One has been successful at negotiation only when either the residual value has been upped by the dealer, or the capitalized cost has been brought down, irrespective of whether the monthly payments have been reduced or not.

Finally, when signing the agreement, recheck the monthly payments, capitalized cost, residual value, dealer fees, taxes, agreement termination penalties, etc., are in accordance to what was agreed. See to it that nothing is left open ended or ambiguous and that everything is specific.

In case you feel that some of the figures are incorrect, do not feel pressurized to sign the lease agreement. Take your own time, ask for explanations, and look carefully.