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 sceptical, 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 on a lease deal - 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. 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 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 lease, you might be able to claim the VAT back.
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: If you have a poor credit score, 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.
Down payment: The more you pay upfront, the less you’ll pay monthly.
As you can see, there are a fair few variables that combine to make up the leasing price tag.
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.
If you’re feeling bold, you can play each dealer off against each other in regards to the price of the vehicle - 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 such as a maintenance package, better trim, or a higher mileage limit.
Can I negotiate more if I buy outright?
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 of 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.
With negotiating on a car lease, it’s always worth a go. With a lease agreement, you can try and push the dealer to take a slice out of the new car price sticker. Also, if you have a used car to trade-in, you can also get some money off.
If you can’t get them to lower the upfront cost, you should try and get some perks off them. When it comes to the money factor, it can’t be disputed that a lease contract is simply the cheapest way (per month) to drive the best, new cars - without having to remortgage your house!
Make sure you do your homework on LeaseFetcher to get the cheapest deals in the UK!