Friday, February 23, 2024

    Questions to Ask Before Leasing a New Car

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    People generally associate negotiations with buying a car. But did you know certain aspects of car leases may also be negotiable? Before you sign on the line, it pays to ask a few key questions that will help you ascertain whether you’re getting the best deal possible — and whether there’s any wiggle room on the numbers the dealership has cited.

    Put it this way: The worst thing they can say is no. Meanwhile, the best-case scenario is that you gain confidence and ensure that you’re optimizing the financial side of the deal before you commit.

    Here are three questions worth asking before leasing a new vehicle.

    #1: What Is the Up-Front Cost?

    Some leases require a down payment; others offer “no money down.” Whatever the exact amount of the down payment on a certain vehicle, there are generally up-front fees associated with every lease, meaning you need to figure out how much you’ll need to pay to drive the car off the lot.

    According to Autotrader, here are some of the types of up-front costs worth asking about so that you can factor them into your decision:

    • Down payment and first payment: The bulk of the up-front fees will likely consist of a down payment — officially called the “capitalized cost reduction” — and your first monthly payment due. Down payment amounts can vary depending on lease deals and negotiations.
    • Fees and deposit: You may be required to put down a security deposit on the car which is refundable if you avoid damaging the vehicle over the course of your lease. Another common front-end fee is the acquisition fee to the bank. Ask the dealership if you’ll face a disposition fee at the end of the lease, too.
    • Taxes and registration: Sales tax varies by state, with some states charging sales tax on the down payment and others on the entire purchase price. Registration fees also vary depending on location.

    #2: What Is the Annual Mileage Limit? What is the Overage Fee?

    Another key consideration of whether a lease will work for you is how far you plan on driving the vehicle. Every lease comes with a mileage limit, often 12,000 miles but sometimes more or less. Exceeding this limit will result in a per-mile charge. As you can imagine, these overage fees can add up very quickly.

    This is why it’s imperative to consider your driving needs ahead of time and negotiate, if need be. Will you be commuting a long distance to and from work? Do you plan on taking any road trips in your new car? Consider realistically whether you can realistically stay within the limit set forth. If not, ask about the possibility of increasing the limit before signing. High-mileage leases do exist.

    #3: What Is the Total Cost of the Car?

    One pitfall of getting ready to lease a car is that it can be all too easy to judge its value by the monthly payment. This is not the best way to establish whether you’re getting a good deal, though, because it doesn’t take into account the lease term nor additional costs.

    What you really want to base your calculations on is the total cost of the vehicle, also known as “cap cost.” Avoid getting hung up on the monthly costs, as salespeople will sometimes lengthen the timespan of the loan to make monthly payments look lower — a move that does not ultimately save you money. Base your negotiations on total cost, instead. Asking these questions before leasing a new car can help you negotiate the terms if possible and find a deal that works well for your budget.

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