I would personally never lease a car, ever.
Never negotiate the monthly payment. Always negotiate the cash purchase price first. Remember you are buying a car, not a monthly payment.
One of the most important aspects of buying a new car is to find out the invoice price of the car. You can find it on edmunds.com or other sources.
Remember a dealer is in it to make money, so work from the dealer invoice up but never the MSRP down. And obviously never pay over list, that is instant depreciation there.
It is helpful to bring a friend down with you when you negotiate and have them bring up points why they didn't like whatever you are looking at. This keeps the salesman off balance, just when the salesman thinks he has you, hit him with another objection. He will then have to sweeten the pot to keep the deal alive. Even if the objections mean little to you, the salesman will believe it is important to you. Prepare to walk away and never shop at only one dealer. You will 99% of the time overpay. And remember, make sure you don't pay tax on the rebate.
You should be finding out the interest before you even talk price. Make sure you get the lowest possible interest. And shop around, too. If a salesman asks you "how much can you afford a month?" Don't answer it. Say it isn't relavent.
Now the question is: IS LEASING FOR ME?
Leasing isn't for everyone, and it is not the cheapest way to purchase a car. The cheapest way to own a car is to buy it and keep it until it falls apart. But for those who keep a car 4-5 years, leasing may be an attractive way of getting a car. Leasing is sometimes the only way to drive a new car when you can afford to make monthly payments, but don't have enough cash for a big down payment.
Leasing a car has distinct advantages over buying a car:
1. No huge down payment.
2. Lower monthly payments
--Here is why: When you buy a $30,000 car you make payments based on that price minus the down payment. When you lease the payments are lower because the car isn't yours at the end of the lease. That means you don't have to pay for the whole car. That means the car that is worth $30,000 may still be worth $15,000 after a 36 month lease. So the leasing company would base their payments on $15,000 not $30,000.
3. You can walk away from the car at the end of the lease.
4. You can drive a more expensive car.
Sounds pretty good huh? No down payment, no headache of selling a used car...lower monthly payments...
Well there is a reason. Leasing is always more expensive then buying a car. That is because at the end of the lease you have nothing to show for all those payments. You can either drop the car off or buy it at the residual value.
There are two types of leases. Open and closed-end leases.
Closed end lease- Fixed residual rate with the option to buy.
This type of lease means that the residual value is fixed at the beginning of the lease and you have the option of purchasing the car at the residual value or simply walking away from it.
Open end lease- Fixed residual rate with the option to buy, BUT you must pay the difference.
With an open end lease there is still a residual value set at the beginning of the lease but if the car is worth more than the residual value then you must pay the difference. Always go for closed-end lease.
Money factor. This is the phrase used for the finance rate upon which the lease payments are based. The lower the rate, the lower the monthly payments. Obviously you want the lowest rate you can find.
GAP protection This is extra insurance coverage that will cover the lease balance and any early termination fees.
Mileage allowance
Watch the mileage allowance you are getting. If you are going to go over the allowence, trade your car in early. By doing that you can finance what you owe on the car by putting it towards your next lease instead of paying the mileage penalty up front.
Wear and tear
You have to keep the car in good shape. If you don't maintain the car well and run it down, you will be responsible for the damages at the end of the lease.
MISC. Fees
--Be prepared to give a security deposit.
Acquisition fee and Disposition fee. Ask for these fees to be negotiated out of your lease.
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Remember leasing a car is not different from buying a car. Never announce to the dealer you can pay x a month to lease a car. Start by negotiating the price of the car as if you are buying the car. Then negotiate the residual value and the excess mileage fees.
To lease or not to lease
-Leasing may be good for you if you want to invest your money in something other then a car.
-Drive a more expensive car
-Trade in every 2-3 years.
-No hassle of selling a used car
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-Leasing may not be right for you if you usually drive your car more then 15k miles a year.
-You don't take care of your car.
-You want to keep the car long term
Bottom line. Make sure leasing is right for you, and make sure you understand everything you sign. Don't understand it? Walk away.
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FWIW, I would never lease a car. For me, it doesn't make any sense. I mod and keep my cars long term.
