When setting your car lease terms it is vital to understand special aspects of your agreement in order to get the best deal possible. Setting your car lease terms properly (and favorably) for you also helps prevent unexpected costs charged to you in the end.
The best auto lease deals for you include a consumer-friendly capitalized cost (cap cost). Pre-negotiation, however, the cap cost in your proposed lease agreement is likely to be higher than you are willing to pay.
The cap cost is the agreed-upon selling price of the car including acquisition fees (monthly lease payment) and any other fees applicable to the deal. Most leasing dealers attempt to charge you full MSRP pricing, similar to how a car dealer will when you purchase a vehicle. The cap cost is negotiable however, and it is advisable to go to the table demanding lower prices.
When the negotiated purchase price of your vehicle is lower, so too will be your monthly lease payments. Capitalized cost reduction (cap reduction) is any term, cause or condition resulting in a lower cap cost for you.
For example, a down payment of $5,000 is also considered a $5,000 cap reduction. Adjusted (net) capitalized cost is the cap cost after the subtraction of cap reduction items. For example, a $30,000 lease to which you put a $5,000 down payment has a net capitalized cost of $25,000.
To get the best car lease deal it is also important to set favorable rent charge and mileage allowance terms in your agreement. Mileage allowance is important to set in excess of your expected needs so you do not drive over the allotted amount. Exceeding your mileage allowance results in extra charges at the end of your agreement. The rent charge (finance fee) is the cost of doing business with a leasing company.
Your rent charge is the net cap cost plus the car’s residual value multiplied by a money factor. The money factor is a number leasing companies use to calculate and then add your finance fee into your monthly lease payments.