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How To Lease A Car

How To Lease A Car

By PattyKay Lilley

If you’re looking to get a new car but don’t have the cash to buy outright, then leasing may be the right choice for you. Car leases can offer lower payments since you aren’t paying off the entire cost of the vehicle and they also allow more flexibility when it comes to swapping out your old set of wheels for something bigger or newer.

But with all this flexibility comes responsibility, as leasing requires more education on understanding your lease agreement and its potential consequences including damage fees or early termination charges. To help guide you through this process, we outline all the key steps involved in how to lease a car below.

Leasing vs. Buying: What’s the difference?

Leasing vs. Buying: What’s the difference?

When it comes to car ownership, leasing and buying are two distinct options, each with their own sets of advantages and disadvantages. Purchasing a car means you’re investing in a tangible asset; you’ll eventually pay off the entire cost of the vehicle, and it will be yours outright. While the upfront and maintenance costs may be higher, the sense of ownership and freedom to modify or sell the car as you please is appealing to many.

In contrast, leasing is akin to long-term rental. You’re essentially paying for the depreciation of the car during the lease term, which usually spans two to four years. This option typically results in lower monthly payments compared to buying. However, you must return the car at the end of the lease unless you decide to buy it.

To determine whether leasing or buying is right for you, consider your financial situation, driving habits, and personal preferences. If you prefer to drive the latest models and don’t mind recurring payments, leasing may be the better option. On the other hand, if you typically drive a lot of miles or wish to own your car for a long time, buying may be more cost-effective.

How To Lease A Car

Once you’ve determined whether leasing or buying a car makes the most sense for your budget and lifestyle, it’s time to begin the process. Here are the key steps involved in how to lease a car:

Step 1: Figure Out the Car You Want to Lease

The first step in leasing a car is deciding on the make and model that suits your needs and preferences. Start by estimating the number of miles you’ll likely drive each year and the lease duration you prefer. This information forms the basis for your negotiation.

For instance, you may want a hatchback with manual transmission, prefer all-wheel drive, plan to drive less than 10,000 miles yearly, and want a three-year lease term. Based on these preferences, you might end up selecting a base model VW GTI, trading all-wheel drive for manual transmission to stay within your budget.

Leasing Pro Tip: Explore online for the best leasing deals. If you’re not settled on a specific car, search the internet for the best leasing deals each month. While these offers serve as an excellent starting point, remember that negotiation is key. Also, it’s advisable to overestimate your annual mileage to avoid hefty overage charges at the end of your lease – dealers generally charge between 15 and 30 cents for every mile over the limit.

Step 2: Go to the Local Dealership and Test Drive the Car

Once you’ve decided on the type of car you want, the next step is to head to your local dealership to take it for a test drive.

This is an essential part of the car leasing process, as it provides you with a direct contact at your nearest dealership and, more importantly, confirms whether the car meets your expectations and needs. During this stage, you don’t necessarily need to know every package or option you want; the primary purpose is to experience the vehicle firsthand.

For those living a considerable distance from the dealership, this step might be skipped, but it’s highly recommended if feasible. For example, during my car leasing journey, I visited the VW dealership in San Francisco and test-drove the GTI.

The unique plaid interior far exceeded my expectations, and I was impressed by the slick electronics setup. The real deal clincher, however, was the driving experience – as soon as I felt the turbo kick in and found myself hugging the bucket seats, I knew unequivocally that this car was the one for me.

Leasing Pro Tip: A test drive isn’t just about the feel of the car; it’s about ensuring it fits your lifestyle. So, take your time to adjust the seats, test the car on different types of roads, and assess the overall comfort and functionality. In the end, your satisfaction is paramount.

Step 3: Check new car inventory for your make and model at three to four other dealerships.

After your test drive, it’s time to delve deeper into car specifics such as color, interior, and optional packages. Start by researching the new car inventory of your chosen make and model at three to four other dealerships.

Once you’ve identified a few vehicles that tick all your boxes, reach out to the respective dealerships and request quotes. At this stage, be clear about what details you want included in these quotes. Specifically, ask them to quote you the total drive-off, the monthly payment after tax, and details about the car’s value – the Manufacturer’s Suggested Retail Price (MSRP), capitalized cost inclusive of the acquisition fee, money factor, and residual value.

Further, specify that you only want to pay the first month’s payment and the registration fees as your down payment. These quotes will be crucial bargaining chips when you negotiate with the dealer where you performed your test drive.

Leasing Pro Tip: Play smart when it comes to down payments. Avoid putting any money towards capitalized cost reduction. It’s a common tactic for dealerships to use larger down payments to make monthly payments seem lower. However, this is usually not in the customer’s best interest.

Here’s why: if the car gets stolen or totaled the day after you lease it, you won’t get any of your down payment back. Yes, you heard it right – it’s entirely non-refundable. Therefore, I strongly recommend not taking this risk. Stick to covering the first month’s payment and the registration fees, and nothing more.

Step 4: Determine the Type of Lease You Want

The next step in figuring out how to lease a car involves deciding on the lease type and lease term that best suits your needs and budget. Generally, longer lease terms, such as three years (36 months) or more, yield lower monthly payments as the cost of the car’s depreciation is spread over a more extended period. This depreciation is typically accelerated during the first one to two years.

There are three main types of leases you might consider:

  1. Open-End Lease: Open-end leases offer some flexibility regarding when to return the vehicle. Instead of a fixed date, you may have a window of several months during which you can turn in the car without incurring early termination fees or late fees. However, open-end leases can be a gamble—the car’s value when you return it may be different from its estimated value when you first signed the lease. If it’s worth less than expected, you may need to cover the difference.
  2. Closed-End Lease: With a closed-end lease, you’ll have a definitive end date for your lease, and the vehicle’s value will also be predetermined. All factors that might influence your “walk away” price are clearly stated in your contract upfront. So, if the car’s market value is lower than initially expected, the dealer takes the risk, and you won’t be responsible for the shortfall.
  3. Single-Pay Lease: In a single-pay lease, you make one payment upfront for the entire lease term instead of monthly payments. This approach can help you secure a more favorable price if your credit score is lower and can also save you money on the lease’s money factor or interest.

Leasing Pro Tip: Understanding your lease options and terms is critical in the car leasing process. Always consider your financial capacity and lifestyle when choosing a lease type and term.

Step 5: Compare Lease Offers

Before making a decision about where to lease your car and which model to choose, it’s crucial to lay out all the details and be clear about the bottom line in each scenario. Remember, the monthly payment isn’t the only cost involved—and leasing is a commitment that will be difficult to get out of if you change your mind later on.

To choose the best car lease offer, compare the monthly cost and total cost of each option. Review how much you’ll be paying in interest and sales tax, what your end-of-lease costs look like (if any), and the upfront costs you’ll have to pay, such as your downpayment and other drive-off fees.

If all is equal and you have two or three very similar offers on your hands, consider the mileage penalty from each offer—is one significantly lower than the others? What other benefits does each dealer offer, such as discounted maintenance packages? And finally, which one is most convenient to you?

Also, consider your interaction with the dealer during the test drive and negotiations. They’ll be putting on their best efforts while trying to persuade you, so if anything feels off during that process, you might save yourself from quite a few headaches later on by avoiding that dealer.

Leasing Pro Tip: Although it may seem time-consuming, comparing lease offers meticulously can save you from making costly mistakes and ensure you select the best deal for your specific needs.

Step 6: Negotiate a Better Lease

Now that you’ve done your due diligence in comparing lease offers, it’s time to use your newfound knowledge to negotiate a more favorable lease. Confirm the manufacturer money factor and residual value for your make and model for the current month—please note that these figures often change monthly.

Select the two additional dealers that provided the most competitive offers during your research. These will likely be the dealerships that have taken your requests seriously and have quoted you the base money factor. Email these two dealerships and ask if they can improve their offer. Suggest that you are looking for a monthly payment that is 20% lower than what they initially quoted.

Leasing Pro Tip: Utilize a lease calculator available online to understand how different terms and down payments affect your monthly lease payment. While it’s convenient to input the details and observe the changing monthly payment, remember that you don’t necessarily require a calculator to negotiate and secure a great deal. Your research, understanding of the process, and negotiation skills are your primary tools for success.

Step 7: Choose the Best Final Lease Terms

Once you’ve successfully negotiated with your chosen dealerships, the next step in mastering how to lease a car involves going back to your local dealer. Reach out to the salesperson who assisted you during your test drive and present him with the most competitive quote you’ve received from your online or email inquiries. Ask him directly if he can beat this quote.

If your local dealer can offer a lower quote, you now need to circle back to your online/email winner and see if they can undercut your local dealer. Essentially, you continue this process until one dealer is unable or unwilling to further lower their quote. When this occurs, you can proceed with confidence to lease the car from the dealer offering the best deal. Rest assured, knowing that you’ve done your due diligence and secured the best possible lease terms for your chosen car.

Leasing Pro Tip: Don’t shy away from this back-and-forth negotiation process—it’s all part of ensuring you get the most bang for your buck. Remember, the goal is to secure a lease that best aligns with your financial situation and car preferences.

Step 8: Ask Questions Before You Sign

Before you finalize the deal and sign the lease contract, make sure you fully understand all the terms and conditions. You should feel comfortable asking your dealer any questions you may have, so you know exactly what you’re committing to. Here are some key areas you may want to ask about:

  1. Excess mileage charges: How much will you be charged if you exceed the allotted mileage?
  2. Wear and tear policy: What constitutes as normal wear and tear and what would incur additional costs?
  3. Early termination fees: If you need to end the lease early, what costs will be associated?
  4. Gap Insurance: Does the lease include gap insurance, or will you need to arrange this separately?
  5. Service and maintenance: Are regular services and maintenance checks included in your lease, or will these be an extra cost?

Remember, leasing a car is a significant financial commitment. Make sure you have all the necessary information to make an informed decision.

Leasing Pro Tip: Don’t rush this process. Take your time to understand the terms of your lease, and don’t hesitate to ask for clarification if you are unsure about anything. It’s better to ask too many questions than to be surprised by unforeseen costs down the line.

Step 9: Finalize Your Lease and Drive Away

Now that you have negotiated your lease terms and thoroughly understand the obligations under your contract, it’s time to finalize your lease. Visit the dealership, review the lease agreement one more time with your dealer, and ensure that all negotiated terms are accurately reflected. If everything checks out, sign the lease agreement.

Remember to take a copy of the lease agreement and any other relevant paperwork. Also, ask about any post-lease services that the dealership might offer, such as maintenance, roadside assistance, or lease-end options.

Once you’ve successfully concluded the leasing process, it’s time to jump into the driver’s seat, start the engine, and drive away in your brand-new leased car. Enjoy the ride and the sense of accomplishment that comes with knowing you’ve secured the best possible deal on your lease.

Leasing Pro Tip: Don’t rush the final step. Make sure you’re 100% comfortable with all the terms and conditions of your lease before driving off. The dealer should be willing to answer any last-minute questions you might have. After all, driving away in a new car should be a joyous occasion, not one filled with doubt or uncertainty.

See more: What Happens If You Put Diesel In A Gas Car?


As you embark on your journey to lease a car, you may have a plethora of questions swirling in your mind. It’s perfectly normal to seek clarity on the fine details of the leasing process. To assist, we’ve compiled some of the most frequently asked questions about car leasing.

Can I negotiate the price of the car I want to lease?

Yes, you absolutely can—and should! While the sticker price of a car is fixed, the capitalized cost, or the lease price, is fully negotiable. Many people aren’t aware that this price can be negotiated much like how one would negotiate the purchase price of a car.

You should conduct thorough research on the make and model of the car you’re interested in and get a sense of the fair market price. Don’t be afraid to negotiate this price with the dealer. The lower you can negotiate the capitalized cost, the lower your monthly lease payments will be.

What happens if I exceed my mileage limit on a leased car?

If you exceed the mileage limit specified in your lease agreement, you will be charged an excess mileage fee. These charges can vary significantly, usually ranging from $0.10 to $0.25 per mile.

It’s important to accurately estimate your yearly mileage before you sign the lease. If you think you might exceed the mileage limit, you can negotiate for a higher mileage limit although this may increase your monthly payments. Remember, paying for extra miles upfront is usually cheaper than paying the overage fee at the end of your lease.

Can I end my lease early?

Terminating your lease early is generally possible, but it can be quite costly. Early termination fees can often be equivalent to the remaining payments on your lease.

However, options such as transferring your lease or buying the car and selling it independently could be more cost-effective. Consider your options carefully and consult with the leasing company if you’re considering an early termination.

Do I need a special insurance for a leased car?

Leased cars often require a higher level of insurance coverage than purchased cars. Most lease agreements will require you to have comprehensive and collision coverage, as well as higher liability limits.

Some leases also require gap insurance, which covers the difference between what you owe on the lease and the car’s actual value if it’s totaled or stolen. Always check your lease agreement for specifics and ensure you have the necessary coverage before driving your new leased car.

Final Thoughts

Leasing a car is more than just the convenience of driving a new vehicle every few years. It involves careful research, meticulous comparison of offers, and strategic negotiation to ensure you get the best deal possible. Remember to always seek clarity on any terms or conditions that may seem ambiguous.

Leasing a car is not only about the financial commitment but also about understanding your responsibilities as a lessee. This includes being aware of your mileage limit, the wear and tear policy, and the implications of terminating your lease early.

With the right approach and a clear understanding of the process, you can lease a car that suits your lifestyle and budget while enjoying the benefits of always driving a newer model. The joy of driving your leased car off the lot is incomparable, especially when you know you’ve secured the best deal possible.

Don’t be afraid to ask questions—remember, the goal is to ensure you’re comfortable with your lease arrangement. After all, leasing a car should be a joyous occasion, a testament to your financial savvy, and the start of a thrilling driving experience.

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