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Negotiating Terms and Comparing Lease Offers

Comparing Lease Offers

Monthly payment components

Comparing the monthly payments is a starting point in comparing different lease offers. However, the components of the monthly payments may differ as well, and those differences may affect you at either the beginning or the end of the lease. For example, does one lease have a higher cap cost reduction or security deposit than the other? Does one have a higher rent charge? Are the residual values for the vehicles the same? Are the gross capitalized costs the same? Use the monthly-payment-calculation portion of the leasing form to pinpoint similarities and differences in the leases you are comparing.

End-of-lease payments

At the end of the lease, you may face a variety of payments. Your decision about what to do (return the vehicle, buy the vehicle, or re-lease the same vehicle) will affect your costs. For example, if you return the vehicle, you might have to pay a disposition fee, excessive wear charges, or excess mileage charges. If you buy the vehicle, you may have to pay a purchase-option fee.

Compare all the costs that you think you are likely to have at the end of your lease. For example, if you think you will probably turn in the vehicle at the end of the lease, compare the disposition fees and excess mileage charges in the leases you are considering. Although you may not be able to negotiate the excess mileage charge, you can compare these charges (for example, 15 cents per mile instead of 25 cents per mile) as part of your overall comparison.

Gap coverage

Gap coverage is often, but not always, included in lease agreements, so first ask whether it is included without an additional charge. If gap coverage is included in the leases you are considering, compare the coverages to identify any differences and determine what you will owe if your vehicle is stolen or totaled. If gap coverage is not included, it may be purchased. If you decide to purchase gap coverage, compare costs and coverages and get estimates from several providers, such as the dealership, the leasing company, or an insurance company.

Rent charge

Just as interest rates and total finance charges for vehicle finance agreements can vary, the rent charge may vary from lease to lease. Some lessors may subsidize the rent charge and offer you a lower rent charge. Paying a lower rent charge is advantageous and may result in a lower monthly payment.

Even if the monthly payment is the same, paying a lower rent charge may be advantageous. If the monthly payments in two leases are the same and the gross capitalized costs and the adjusted capitalized costs are the same, paying more depreciation and a lower rent charge will reduce the lease balance faster and create a lower residual value. This approach is particularly beneficial if the lease has a residual-value purchase option. More Info On the other hand, a lower rent charge in and of itself is not necessarily a good deal--the lease with the lower rent charge may have a higher adjusted capitalized cost or a lower residual value (that is, higher depreciation) that makes up for any difference in rent charges. You will need to compare the residual value, rent charge, gross capitalized cost, and the adjusted capitalized cost of the vehicles you are considering to determine if the lower rent charge is a real savings.

Up-front, ongoing, and end-of-lease costs

As with other financial transactions, there are often trade-offs among up-front, ongoing, and end-of-term costs. Be sure to compare all costs of the leases you are considering before making a decision. You may want to minimize your up-front costs, or you may want to lower your ongoing costs. Be aware of the time value of money in your decision. In any case, you need to compare all the figures, not only the monthly payment, to make sure you understand the costs involved.

Total of payments

This total of payments amount is the overall cost of the lease if you do not purchase the vehicle. You can use this figure to compare leases when deciding which lease offer is best for you. However, the figure does not reflect differences in security deposits, purchase-option prices, or the time value of money when up-front costs are different. Although you will know the total of payments, you will have to decide how the timing of those payments fits in with your budget and your time value of money. Although you may prefer to minimize your up-front costs, choosing a lease with lower ongoing costs may reduce the total of payments. Two leases may have the same total of payments but distribute the amounts differently among the up-front, ongoing, and end-of-lease time segments. You need to consider all the figures, not only the monthly payment, to make sure you understand what your costs will be and when they will be due.


Compare the number of months and the mileage allowance in the lease with the vehicle's warranty period. If you are considering a lease term or a mileage allowance greater than offered by the warranty, be sure you understand what expenses you will be responsible for once the vehicle is no longer under the warranty.

Purchase option and purchase-option price

Many leases offer an option to purchase the leased vehicle at the end of the lease. Your circumstances may change over the term of the lease, and having a purchase option will increase your flexibility at lease-end. When comparing leases, look to see if each offers a purchase option, what the purchase price will be, and if there is a fee to exercise the purchase option. If the vehicle turns out to have a higher market value than the residual value at the end of the lease, having a purchase option may enable you to take advantage of the difference (that is, the equity). See the section Vehicle Return in "Leasing vs. Buying." More Info

Different lease sources

Vehicle dealerships and independent leasing companies usually have access to several different lessors to which they can assign a lease. A new-car dealership will almost always be able to lease through the captive finance company of the vehicle's manufacturer. The same dealership can usually also offer leases through independent finance companies or financial institutions, such as banks or credit unions. Once you have selected a vehicle, ask the dealership or leasing company to show you the terms and conditions of several different lease sources so you can choose the one that best meets your needs.

You can also shop for lease funding before going into a dealership. Check with your financial institution (bank or credit union, for example) to see what terms are available. That way you have a better basis for comparing the different lease offers from the dealership.

Early termination charges

If you end your lease early, you may face substantial early termination charges. Be sure to compare the early termination clauses in the lease agreements you are considering. There may be differences in the methods for calculating these charges. You will want to consider any differences, the likelihood of early termination, and other terms in the lease offer. Differences in residual values may also affect your eary termination liability. See the section Early Termination in "Leasing vs. Buying."

Alternatives to advertised specials

If you are responding to an advertisement for a lease, you may find that there is little room in that particular offer to negotiate more-favorable terms, because manufacturers or lessors often provide special offers that set some of the lease terms. However, you can still ask about alternatives to any advertised special. For example, if a special deal is offered by Spark Finance on the Spark EX but you can't negotiate the value of the vehicle, you may want to ask if there are other lessors that would allow some room for negotiation and either match or beat the deal offered by Spark Finance. You may also want to check with other Spark dealerships and with independent leasing companies.

Other items listed in the "What's Negotiable?" section

If you have negotiated the value of the vehicle, the capitalized cost reduction, the length of the lease, the mileage allowance, any vehicle options you have chosen, and (or) multiple security deposits with different lessors or on different vehicles, make sure that you have considered these differences when comparing lease offers. For example, one lessor may offer you a 42-month lease instead of a 48-month lease; you need to compare the payments on these two leases while considering the different terms in each.

Single-payment vs. multiple-payment leases

You may want to compare single-payment and multiple-payment leases. In a single-payment lease, you make one single lump-sum payment in advance rather than periodic payments over the term of the lease. This lump-sum payment should be less than the total amount you would pay if you were to make periodic payments over the term of the lease, because the lease balance is less throughout the single-payment lease, lowering the rent charge and therefore, the overall cost. More Info

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Last update: May 5, 2003