Don’t Lease, But If You Do, Negotiate

Here's one simple way you can cut costs when you lease a car.

— -- Today at the pool, a fellow mom was telling me that her 15-year-old car is on its last legs (last wheels?) and that she plans to lease a new car instead. I was horrified. How come?

Well, this fellow mom is a financial planner! She should know that leasing is not a good deal for people like her who keep their cars for 15 years.

Here’s why. “Leasing” is another name for “renting” and that’s really what you’re doing. Renting a car for 24 to 36 months. Spending money that you will never get back and ending up with nothing at the end. Zero. Zilch. Nada. If I had to make payments on a new vehicle, they would be purchase payments, not lease payments, so I’d have something —namely a car— to show for my money at the end of the term.

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Still unsure whether to lease or buy? Here’s a calculator to help you decide. I suspect the math will convince you better than I can that leasing is rarely the best financial choice.

That said, I’m well aware that many of you will “disobey” me and go for a lease deal in a hot second! About a quarter of car deals are leases, according to automotive website Edmunds.com. So it’s time for me to meet you where you are. At the leasing desk. Here’s what I have to say about that: Don’t lease, but if you do, negotiate!

That’s right. Few people know this. When you lease, you don’t have to accept the price offered in the commercial or at the dealership. You can haggle, just as if you were buying! In fact, I suggest you do just that. Haggle as if you plan to buy the car and then reveal -- only at the end— that you want that price to apply to your lease.

Your monthly lease payment is then based on this negotiated price. It’s not some random number the dealer dreams up. Monthly lease payments are calculated lots of different ways, but here’s a simplified formula: You take the car’s purchase price, minus what it will be worth at the end of the lease and divide by the number of months. If you hate haggling, this may not be welcome news, but the hundreds or thousands you’ll save will be.

Opinions expressed in this column are solely those of the author.

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