Can lease prices be negotiated?
The short answer is yes, under certain circumstances a lease price can be negotiated. In this article, I’ll detail how to get the best deal when negotiating a vehicle lease.
How are lease prices calculated?
An overall lease price is made up of three parts. Depreciation Fee, Finance Fee and Sales Tax combined. The depreciation fee covers the expected loss in value of the vehicle over the course of the lease. Depreciation explained. A finance fee is another word for the interest a finance company charges for lending monies. Sales tax is the VAT charged on the purchase. None of these elements of the car lease is negotiable. What is negotiable however is the cost of the vehicle these calculations are based upon, more on that in a moment.
What factors affect a lease price?
It’s not as simple as the sum above. There are several variables which can affect the price of a lease. Be mindful of these when considering your negotiation tactics.
- The car type. Each vehicle comes with a different original price tag. The higher value the car, the higher the lease price will be.
- Contract length. The length of the contract has a big impact on the lease price. The longer the lease the better value price offered.
- Annual mileage requirements. Depending on the annual mileage needs of the driver, the lease price will increase with the more miles needed.
- The driver’s credit rating. If the driver’s credit rating is poor then they will often have to select a higher cost finance option.
- The type of lease contract chosen.
- Optional extras and package add-ons.
What part of the lease price can be negotiated?
You now have all the information about how lease prices are calculated and what factors can affect them. They say knowledge is power and knowing that the only part of the lease cost that can be negotiated is the vehicle price gives you a better chance of success.
Everything starts with the cost of the vehicle. Therefore, the depreciation fee will reduce, the finance fee will reduce and the sales tax will be lower if the cost of the vehicle can be discounted.
Preparing for the negotiation
Like going into battle, preparing for the negotiation takes some time and research. But trust me, it’s worth it. Here’s a step by step guide to preparing for negotiation.
Step 1 – Research the vehicles and their prices. Having a clear idea of what vehicles are of most interest and their prices will fill you with confidence when you begin negotiations. Knowing the starting point and working out a reasonable target is far easier when you have all the information in front of you.
Step 2 – Set a target. Knowing what price you want to reach an agreement on before you pick up the phone is key. It’s best to also have in mind a ‘settle price’. In case best scenario isn’t achievable, knowing what price you would be prepared to accept from the outset will prevent you from making rash decisions.
Step 3 – Shop around. You may have a preferred lease provider, but knowing what other options are on the market will ensure you can negotiate to a realistic figure.
Step 4 – Have a backup option. It’s useful to have a secondary lease provider in mind. If your negotiations aren’t getting anywhere then walk away. Having a backup option in mind will make you feel more confident to take the plunge and walk away.
Knowing what is a reasonable price
You might know what you want to pay for your lease vehicle but how can you discover if it is a fair price? Using the Parkers Car Price Guide can really help with this. If necessary show this to the lease provider. Don’t feel pressured by limited time offers to reduce the price. These are often not timebound.
Opening the negotiation
Now that you’ve done your homework the following process will be a smooth ride. Only negotiate on the cost of the vehicle at this stage. Start by telling the lease provider what type of lease you’d like and your shortlisted vehicles. Giving them this information up front will help the lease provider think about which vehicle they can offer the best deal on. Explain that you have done some research and you’d like to discuss selling price, not just monthly payments and that if a fair deal can be reached that you’d be prepared to lease today. Also, inform the dealer that if a suitable lease agreement can’t be reached that you’d be happy to visit a secondary dealer to discuss the leasing with.
By mentioning the above you’ll be showcased as a knowledgeable buyer and it provides the dealer with all of the information they need up front to find the best deal for you.
Closing the negotiation
Finally, once a fair vehicle price is reached, ask your lease provider to calculate your monthly payments based on all the figures that have been agreed upon.
While this is being calculated it’s worthwhile doing some sums of your own to ensure that both their figure and yours match up. If they don’t, raise it with the lease provider and ask to see thier calculations o be certain there are no hidden fees.
Often, the difference is a mistake or a previously unmentioned extra charge. You can read more about hidden fees in a lease here. Either way, it’s good to notice before you sign anything.
Are there times when negotiating isn’t successful?
Special advertised lease deals are jointly sponsored offers between the lease company and the car manufacturer. On these packages the vehicle is already at a reduced cost and no further negotiating is necessary. You can, by all means, try if you’d like too, but typically every element of a deal — lease price, term, money factor, residual, vehicle make, model, and style — is already set and can’t be changed. In fact, most of these manufacturer deals are better than you could negotiate yourself.
Checklist of other tips for negotiation on your lease deal.
- Always negotiate price, never monthly payments (unless you know how monthly lease payments are calculated
- Avoid telling the dealer what monthly payments you can afford – give the dealer a price instead
- Never let the dealer tell you your source of invoice prices or trade-in values is wrong. Yours aren’t wrong, just different to theirs.
- Never, ever give the dealer a deposit to “hold” a car. The car will still be there when you get back.
- Don’t sign a “purchase/lease agreement” until you’ve settled on a deal
- Never reveal your attraction to a vehicle (“I just love that car”) during negotiations
- If you’re not comfortable with the salesperson, ask for another, or leave
- Always give yourself the option of walking out if negotiations don’t go your way
- Let the dealer know up front that you are knowledgeable about leasing (after all you did your research)
- Generally, it’s best to deal at the end of the day, at the end of the month nearing the end of target periods.
- Never negotiate when you are in a hurry, desperate, or have limited time
- If you have poor credit, never take a car home until your credit has been approved by the dealer’s finance company
- If you become tired, confused, intimidated, or pressured during negotiations, come back another day