Trying to get the right price on a lease car is a balancing act.
If you go in too naive, you’ll get conned, too skeptical, and you’ll never end up pulling the trigger and buying.
Thankfully, with car leasing, you don’t need to worry about negotiation… or do you?
It might be surprising to learn that you actually can negotiate to drive the cost to lease a car down - but not as freely as with a used car.
We’re going to run you through exactly how the lease payment figure is made up and when it’s worth trying to negotiate when scouting out the best business or personal contract hire deal. We’ll also give you some pointers on how to approach it.
Where does a lease car’s price tag come from?
Broadly speaking, the more residual value your car has at the end of the lease, the higher the selling price. This results in the lease company getting back more money and leaves you with a cheaper monthly payment.
A lease price is based on a few factors:
- Depreciation fee - How much value the vehicle will lose over the contract term.
- Finance fee - This is the APR or interest rate on a car lease that the finance company will charge you for the risk of lending money.
- Sales tax (VAT) - This is 20% of the purchase value that you’ll have to pay. If you’re taking out a business car lease, you might be able to claim the VAT back (read more in our "how does business car leasing work" guide.
These are the 3 main factors that affect a lease car’s price. Of course, you can get a bit of cost reduction based on other factors as well.
Here’s a few of them:
Manufacturer: As mentioned, a car with a higher MSRP will be more expensive to lease. These cars tend to depreciate the most, so unsurprisingly, an Audi Q7 will be more expensive than a Nissan Qashqai!
Credit score: You don't always need good credit to lease a car. If, however, you're found to have a poor credit score during the car lease credit check, you’re unlikely to be offered a reasonable interest rate.
Mileage: Your monthly repayments depend on the number of miles you drive in a year. If you undershoot this figure, you’ll end up getting hit with excess mileage charges, so choose carefully.
Contract length: Shorter contract lengths require less commitment, but they also cost a lot more per month.
As you can see, there are a fair few variables that combine to make up the leasing price tag. Road tax is included in car lease prices, but is not negotiable.
You’re probably asking…
When is a lease deal negotiable?
Worryingly, none of the factors that make up the cost of a lease deal seems negotiable - they all look pretty set in stone. You can’t negotiate on the depreciation, interest rate or VAT.
However, you can actually negotiate on the cost of the vehicle. This obviously reduces your monthly fee. If the cost of the car is smaller, you’ll pay less interest, VAT and so on.
If you’ve decided you’re going to give negotiating a shot, we’d recommend you follow these steps:
- Research: Figure out how much the vehicle is actually worth. Look at competitors and see if your leasing company is charging more for the new vehicle than others - then you know there’s some wiggle room. Make sure to take a test drive to ensure you like the car before you take out a lease contract!
- Set a realistic expectation: It’s essential to have a figure in mind. You should always go lower than you want. Also, be realistic about the lease term - do you really want the car for 5 full years?
- Compare: Make sure you compare different purchase prices from dealerships on LeaseFetcher and get in touch with each to see what they can do.
It’s important to note that for many dealers, the new car is already at its lowest price - so it might be hard to haggle on the value of the car.
Your best bet is to give the same request to multiple brokers, then simply select the lowest offer you can get!
Even if your trip to the car dealership leaves you unsuccessful, don’t be disheartened - you can try and save money elsewhere. You could try and get extras at a lower price, like a lease car maintenance package.
Aside from negotiation, how else can I drive down the price?
There are a few simple things you can do to keep the overall cost of your car lease down:
- Pick a cheaper trim - we can get carried away with the fancy add-ons, but ask yourself whether you can justify the higher cost of a premium trim.
- Mileage - a higher mileage lease pushes up the cost of the lease since the car will depreciate faster. Do you need the extra mileage?
- Car lease contract length - the shorter your lease, the lower the overall lease. If you need short term monthly savings, then this is a good option.
- Time of year - we know a few tricks of the trade! If you know the best time to lease a car, you can push the overall cost down. This is usually off peak times like Christmas or at the end of a month.
Can I negotiate more if I buy outright?
To buy or lease a car - the age old question.
There’s obviously room for negotiation if you buy a new car outright, but probably not as much as you think.
Car dealerships make money off the finance - this is why used cars make big dealerships so much money, despite the price of the car being low.
So even if you’ve got the cash to buy a brand new SUV outright, your negotiation wiggle room remains the same with a lease.
The benefit of leasing deals is that your payment is condensed into one monthly lease payment. This is far cheaper than a bank loan or hire-purchase agreement.
It's always worth a go negotiating on a car lease. With a lease agreement, you can try and push the dealer to take a slice out of the new car price sticker.
If you have a used car to trade-in, you could ask about the possibility of a car lease part exchange you can also get some money off.
If you can’t get them to lower the upfront cost, you can try and get some other perks thrown in.
Check out our car leasing tips for other ways to drive down the cost if your leasing broker won't budge.