1. Negotiate the Purchase Price (Cap Cost)
Leasing is essentially paying for the depreciation of the car over the lease term, plus interest and fees. The higher the purchase price of the car (the "capitalized cost"), the higher your monthly lease payments will be. Negotiating the purchase price before agreeing to the Car Leases Under $200 a Month no Money Down terms is key. This can be a great way to lower your payments because your lease payments are based on the negotiated price, not the MSRP.
Tip: Treat the lease negotiation just like a car purchase—don’t let the dealer focus only on your monthly payment.
2. Choose a Car with Low Depreciation
Depreciation is a major factor in determining your lease payments, so selecting a car that holds its value well can result in a lower monthly cost. Luxury cars and sports cars tend to depreciate faster than more economical vehicles, so you might want to avoid those if your goal is to save money.
Research models known for retaining value, such as:
- Toyota, Honda, and Subaru (often good for long-term value)
- Lexus, BMW, and Audi (in some cases, they have relatively strong resale value for leases)
3. Look for Lease Specials and Incentives
Car manufacturers frequently offer special lease deals and manufacturer incentives to encourage people to lease their cars. These offers can include low or no money down, low-interest rates, and cash rebates, all of which can significantly reduce your overall cost.
Check for deals on:
- Year-end or holiday promotions
- Manufacturer-specific programs (e.g., “lease loyalty” or “military discounts”)
- Dealer-specific discounts
4. Put Down a Larger Down Payment (Capitalized Cost Reduction)
Putting a down payment on a lease can help lower your monthly payments. The capitalized cost reduction lowers the amount you need to finance over the lease term. While you should avoid large upfront payments that could eat into your savings, putting down a moderate amount could help save you money over time by lowering your monthly lease payment.
However, don’t overdo it. If your car is totaled or stolen during the lease, you may lose your down payment unless you have insurance that covers it.
5. Avoid Excessive Mileage
Leasing contracts usually come with mileage limits, and exceeding the limit can result in hefty penalties at the end of the lease. The standard lease agreement is typically for 10,000 to 15,000 miles per year, and if you drive more than that, you’ll need to pay extra at the end of the lease (often 10-25 cents per mile).
If you’re not sure how many miles you’ll drive, it’s better to negotiate a higher mileage limit up front. It’s generally cheaper to negotiate higher mileage allowances at the beginning of the lease than to pay for the excess mileage at the end.
6. Understand the Lease Term Length
Leases can range from 24 months to 48 months, and while a longer lease term means smaller payments, it may also increase the total amount paid over the life of the lease due to higher financing charges. Typically, 24-36 months is the sweet spot for balancing monthly payments with the total cost of the lease.
7. Pay Attention to Fees
Leasing often comes with hidden fees, so make sure you fully understand all the charges you may face during the term of your lease. Some common fees to be aware of:
- Acquisition fee: Charged for processing the lease agreement.
- Disposition fee: A fee charged at the end of the lease if you return the car.
- Wear and tear charges: Leases often include limits on how much wear and tear is allowed, and exceeding that can lead to costly penalties.
- Early termination fee: If you need to break the lease early, you may face a hefty fee.
Ask the dealer for a detailed breakdown of these fees and how they might impact you.
8. Lease a Car That’s in High Demand
Certain cars hold their value better because they’re in high demand, and leasing one of these vehicles can save you money in the long run. Cars with strong residual values (the projected value at the end of the lease term) often have lower monthly lease payments.
Look for vehicles that are:
- Popular in your area (e.g., compact SUVs, sedans, or hybrids)
- Likely to hold their value well (such as certain Toyota and Honda models)
9. Consider a “One Pay Lease”
A one-pay lease involves paying the entire lease amount up front, instead of monthly payments. This option can be appealing for people who have the cash available and want to avoid paying interest and monthly fees. The upfront payment typically reduces the total cost of the lease, since interest is calculated upfront.
However, consider whether you can afford to pay the lump sum, and be sure to confirm the dealer’s policies on refunds or early termination.
10. Carefully Review Your Lease End Options
At the end of your lease, you may have the option to buy the car for a pre-determined price (the residual value), but this price may not always be favorable. If the car has depreciated less than expected and is worth more than the residual value, you might want to purchase it. However, if it’s worth less, you should just return the car.
Before entering into a lease, consider whether you’ll want to buy the car at the end of the term or simply return it. Understanding your end-of-lease options can save you from unexpected costs.
Final Thoughts
Leasing a car can be a great option for saving money if you follow these strategies. The key is to negotiate wisely, be mindful of the details in your lease contract, and choose a car with favorable depreciation and value retention. The more informed you are about the terms and options available, the better you can manage your lease costs over time.