Best car for Leasing

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When Marc Frons, former chief information officer with The New York Times, went to his local car dealer, he believed he could get Infiniti's advertised lease deal. This special offered the 2012 G37x sedan for $399 a month for 39 months, with nothing due at signing. When he walked out later that day, Frons left with a new car and a deal that he would later realize cost about $3, 500 more than he was anticipating. How did Frons (who says he is "no rube") end up with such a bad lease? He fell for a few of the most common leasing blunders. Here are some of the worst leasing mistakes and how you can avoid them.

You negotiated the wrong number

When you discuss leasing a car with the dealer, the main figure salesmen focus on is the monthly payment. In Frons' case, his dealer started with an offer of $459 a month. Further negotiations encouraged Frons to talk only about this number. "This, as it turns out, is precisely what car dealers want you to do, " he writes. "And it is all too easy to get distracted by the monthly payment and underestimate or ignore all the other fees and expenses that you either need to pay up front or that determine the price you’d pay for your vehicle if you decide to buy at the end of the lease."

The actual number you should be talking about is the purchase price (which is listed on the lease contract as gross capitalized cost), says Jeff Ostroff, CEO of CarBuyingTips.com. "I always tell people to haggle the price of the car down first as though you're buying it, and then let them use that lower number as the number that gets fed in to calculate your lease payments, " says Ostroff. A 2016 Honda Accord, for example, has a starting MSRP of $22, 205. Agreeing to a price that is $2, 000 less can drop your lease payment by more than $50 each month.

You didn't negotiate at all

Even worse than spotlighting the monthly payment instead of the purchase price is skipping any type of haggling at all. Dealers may present you with a lease offer as if it is set in stone, but that's really not the way it works. "There are some things in the lease which cannot be negotiated, and other things that can, " says Philip Reed, automotive writer with NerdWallet. "The biggest factor by far in negotiating is to make sure you negotiate the price of the vehicle." In addition to the purchase price, some dealer fees can often be discounted or eliminated. Talking down the price of a lease is best done face-to-face at the dealer or online with the dealer's internet sales department, as Frons discovered. "After so many years of shopping for bargains online, I made the mistake of believing that searching on Google was haggling, " he notes.

You took the first deal you found

After you haggle for the best lease deal, you won't know how much money you are actually saving unless you compare it with another offer. Reed says a common (but potentially pricey) blunder comes when consumers "don't shop around for the best offer. In other words, they go into a dealership. It sounds pretty good. They sign the lease not having anything to compare it to." This is one of the oversights Frons made while leasing his 2012 Infiniti G37x. "How did I end up with such a bad deal?" he asks. "It turns out that the day you’re going to pick up your new car is the absolute worst time to negotiate, unless of course, you are willing to walk out. And while I told myself I was willing to walk, I also wanted my car."

When comparing different lease deals, make sure you are factoring in the entire cost of each lease offer. The easiest way to determine how much your lease will cost is to take the monthly payment and multiply it by the number of months in your lease term. Add to this any taxes or fees. Then, subtract your down payment, rebates, trade-in allowance, and any other bonuses. Your final number is the total amount you will spend over your lease term.

You forgot about fees

Lease fees can make up a sizable chunk of your upfront costs. If you forget to ask the car salesman for a list of their fees while they are pitching you a lease deal, you may be in for a nasty surprise when it comes time to sign the paperwork. After reviewing his lease, Frons discovered "fees on the leasing agreement that are almost comically arrayed against the consumer. If I decide to turn in the car at the end of the lease without leasing another from the dealership, I must pay a $395 disposition fee. Yet if I decide to buy, I must pay a $300 purchase option fee." Not all of these charges are mandatory, says Ostroff. He advised a family member to haggle on the lease fees, which resulted in the dealer cutting the fees from $1, 000 to $500.

Your down payment was too high

If your down payment was more than about $2, 000, Reed says you probably put too much money down. "People make the mistake of making a really large upfront down payment in order to knock down their monthly payment, " he explains. "That's the strategy that's always worked for buying a car ... but with leasing, it's different." That's because leasing companies typically don't give you credit for money you have paid up front. If your car is totaled, the insurance company will pay the leasing company for the car. But Reed says there's no guarantee that you will receive a refund if the amount you have paid is higher than the car's current value.

You didn’t get gap insurance

You can also get into trouble if your lease doesn't include gap insurance. If your car is totaled and its current market value is less than what you have paid to date, the payment from the insurance company won't cover the full amount owed. And you'll be on the hook to make up the difference. The good news, says Reed, is that "most of the good lease contracts will have [gap insurance] in the contract. But if it's not there, you'll need to buy it." Dealers typically sell gap insurance policies, though you may get a better price if you purchase a policy from your insurance company or another third-party source.