The new year brings many changes. Those who are ending the term on their current automobile lease may be in position to consider a buy-out or could be looking to secure a new, better lease deal.

Advantages to leasing

Many people realize the benefits of leasing a car. Unlike financing the purchase of a car, where you are spreading out the entire cost of the car over the terms of the loan, a lease requires you to only pay for the value of the car for the time you will be using it. Another advantage to leasing is that you can choose to lease the same car for another term or trade it in to lease a new vehicle. This guarantees that you will always be driving a new vehicle. Chances are the car or truck will also be covered under the manufacturer’s warranty for the duration of the lease. As a result, if the vehicle breaks down, any repairs will be covered.

The high insurance costs required to keep coverage on a leased vehicle and the fact that you will not own the car or truck when the lease is up are the primary pitfalls of leasing. Still, the numerous other benefits make leasing an attractive option to many people.

Negotiating lease costs

Just as with financing a car purchase, when you opt for a lease you can negotiate the price of the car to help keep your payments down. Some people mistakenly assume that the lease price advertised is set in stone with no room for negotiation. This is not the case.

It is also helpful to research which cars have the highest resale value, as those will prove to offer the lowest lease rates. This is because of the residual value of the car. Lease terms are sure to be more costly on cars that do not hold their value because that means the dealership will not get as much in profit when they try to sell the car after the lease expires. Conversely, cars with higher resale values are attractive and will sell well once they’re returned, which enables cost savings to be passed on to the lessee. To get the breakdown of residual car values, refer to the “Residual Percentage Guide,” issued monthly by Automotive Lease Guide, which includes charts that estimate how much each vehicle will be worth after a specified time period. This guide often can be found in area libraries for reference.

Knowing the sticker price of a vehicle, the MSRP value as well as the estimated invoice price, can help you find a price for the vehicle that you feel comfortable with.

To further drive down the monthly payments of the lease, the down payment, known as the capital cost reduction, will need to be considered. Naturally, the more you put down on the vehicle, the lower your monthly lease payment will be. However, many people look to leasing as a less expensive option overall, and you may be better off making the minimum down payment.

Negotiating money factor and term

The money factor is the interest rate on the lease. In order to be in your best interest, the money factor should be less than the interest rate paid on a 60-month auto loan. You can figure this out by multiplying the rate by 24 months. If the number is higher than the interest rate for the 60-month financing option, then you should negotiate down the money factor or walk away. It is important to note that the money factor is determined by the car manufacturer, not the dealership. It also is not based on credit rating and history. So having perfect credit may not affect the money factor much.

The term is the length of time for which you will be making payments on the lease until it expires. A longer lease is not always the best way to lower payments, as this will affect the residual value of the vehicle after the lease is up. It is imperative to work through different scenarios with the finance manager to determine which lease term garners the best capital cost and thus will give you the most affordable monthly payment.

Another way you may be able to reduce your monthly payments is to negotiate over mileage and wear and tear on the vehicle. Leases will allot you a certain number of miles and a certain level of wear on the vehicle before penalties are added in at the end of the lease. Some people negotiate the lease down by taking a lower mileage rate. However, this may not be wise to do because should you go over the mileage amount specified, the penalty payments can be steep.

Many people mark the new year with a new purchase, like a car or truck. When leasing a vehicle, it is in your best interest to negotiate and know the rules of leasing to get the best deal.