JavaScript must be turned on in order for this site to display properly.

Personal and Business Banking

Auto Leasing Guide

Chapter 3: If You Choose to Lease, Protect Yourself

  • Summary
  • Article

If You Choose to Lease Protect Yourself

This handy calculator can help you figure out the maximum amount you will have available to buy your next car.

Chapter 3: If You Choose to Lease, Protect Yourself

With all these problems, can a lease or a lease-type product be good for you? If you are extremely careful, and don't mind taking risk going over your mileage limit or being socked with high wear and tear charges, leases can be a convenient way to finance. Just be aware that you may pay a penalty for that convenience.

Leasing Done Right

  1. Budget for a lease payment as StreetWise recommends you budget for a car payment. Use our online StreetWise Available Cash Calculator.

  2. Read the StreetWise Auto Buying Guide. All the valuable information contained there applies to leasing as well.

  3. If you have a trade-in, consider selling it yourself rather than trading it. The trade-in is the Achilles heel of leasing. Selling it yourself could make you a thousand or two, plus it makes it much harder for a leasing company to confuse you or low ball your trade as you begin to negotiate the lease.

  4. If you're planning to let the leasing company take your old car as a trade, "Shop" it to determine its exact, specific wholesale value. In a lease transaction, this step is vital. Drive to three used-car operations, and see what they'll pay you to buy it outright. The highest offer is your car's real wholesale value. You can check CUDL AutoSmart, NADA Guides or Edmunds online to get published values.

  5. Determine how many miles you will probably drive your leased vehicle each year. If you haven't determined this, you're more likely to get stuck with high mileage penalties at the end of the lease. The worksheet below can help you determine your average annual mileage.

    Use only whole positive numbers – no commas, decimals, or negative numbers.

    Leasing Vehicle Mileage Worksheet

    If the average miles per year is at least a few hundred miles less than your annual mileage options for leasing (15,000 is typically the maximum), it will be easier to avoid mileage penalties. If it is equal to or above the mileage options you are offered, you're in mileage penalty territory and should consider conventional financing instead.

  6. Do your homework on the vehicles that fit your lease budget using nonprofit, consumer sites first. Safety and dependability matter even more, if you plan to lease. Since you're not going to own the vehicle, you actually have less rights than a purchaser. Lease a lemon or the most dangerous vehicle sold in America, and you may be stuck with it. Check the Center for Auto Safety to get more information.

  7. Go to the web and visit potential leasing sources to gather information. Don't even consider arranging a lease yet. Remember the links below are outside of the DCU web site and DCU's privacy policy. Review each site's privacy policy before looking around or entering any information. DCU does not endorse these sites and takes no responsibility for statements or information you find there. And don't say yes to anything yet.

    • Go to the web site of the "Captive" financing source of your favorite vehicle. Always use a captive site as one of your lease comparison options. Say you like Toyotas the best. Go to Toyota Financial Services and research information on leasing or financing. Play around, design a vehicle you'd like to lease, and keep an eye out for lease specials. Print off a rundown on the vehicle you'd like to lease the most.

    • Go to some independent leasing sites. Do a search on Yahoo, Google, or Bing on leasing. Specialty sites may not save you money, but may provide you easier access to certain vehicles. And be sure to read the StreetWise Auto Buying Guide before visiting such sites. DCU does not endorse them.

    • Using your budgeted monthly lease payment, let several sites develop you a lease quote. Always specify the exact same vehicle and equipment at each site. Print off these quotes.

    • Take your time and have some fun on this web-shopping foray. You'll notice some sites require a deposit to give you a "guaranteed" lease payment or terms. Scratch these sites off your shopping list.

  8. Get hands-on experience in the vehicle you like the most – rent one. Investing a hundred dollars in a weekend rental is far better than any test-drive at the nicest dealership, and safer for your wallet in the long run. Or rent one for the day.

  9. Choose two leasing companies. We recommend the "Captive" source that manufactures the vehicle you like the best (which means you'll be dealing with a local dealership) and an independent source. Your independent source can be a bank, a leasing broker such as, or an "online" source on the web. Visit the dealership! You're not going to know if you're throwing away thousands if you're not willing to make this trip. Make sure you've printed off a vehicle quote, based on your budgeted payment, for each of these sources.

  10. Find an actual vehicle through your captive leasing source that fits your needs and budget. This means you're going to a local dealership! We're going to use this vehicle to allow you to "work" your leasing companies to get them to the best deal. The captive leasing company's web site will lead you directly to your closest local dealership.

  11. Visit the dealership and find the one vehicle that fits your needs. Deal only with the leasing manager. Let the dealership appraise your trade-in. Tell the manager in advance the true wholesale value of your trade-in, and let the manager know you're not leasing with his company if they don't meet that wholesale value. If the manager refuses to deal with you on your trade-in before discussing the lease, leave the dealership and find another source.

  12. When you agree on the true wholesale value of your trade, drive the new vehicle that interests you the most, and then let the lease manager write up a detailed lease quote. Make sure the quote includes these tidbits, at the minimum:

    • A lease based on the actual number of miles you will probably drive over the lease term. You figured that number of miles in step two. Insist that your lease is computed using this mileage. If a leasing company won't do this, don't lease from them.

    • MSRP of the vehicle

    • Your trade-in's true wholesale value.

    • Total "rent" or "service charge" or "cost of money"

    • Itemized breakdown of Capitalized Cost. Note: leasing companies are required to give you a breakdown of capitalized cost

    • Number of months and monthly payment

    • Serial number of vehicle

    • Residual value of vehicle

    • The amount required as an initial cash payment (including deposits and any other cash payments whatsoever).

    • Excess mileage charge

  13. Plot your escape! Tell the manager you'll get back to them after talking with your other lease source. At that point you'll notice the manager may begin to cut his or her lease payment. Sit patiently if this happens, write down the new figures, and then leave. At this point, the manager is probably going to call in reinforcements. Don't fall for it! Get out of there and head home.

  14. Compare the monthly payment and lease terms to your budget figures. How are you doing? If the payment and months fit your budget, you're doing fine. Now, let's get that payment down some more.

  15. Contact your other leasing source. Provide them the information, including dealership name and vehicle serial number of the vehicle you've just visited, but don't tell the source what payment and terms the dealership gave you. Ask your source to provide you the exact same information on the exact, same vehicle, if possible. Make sure the company uses your actual miles to develop their lease. Many times, this source will actually get you information on the very same vehicle. That's very good for you. At other times, they will get information on a similar vehicle. That's okay, too, as long as the vehicle is relatively similar.

  16. Compare item for item your out-of-pocket outlay for each leasing source's charge for deposits, registration fees, other any other charge you're required to pay in cash. Any financed document charge, such as an Origination Fee, will have already been accounted for in the lease payment for each source. But cash outlays can skew your comparison. For instance, if both sources agree to a $400 payment, but one source requires a non-refundable $1,000 payment for any reason, that source just lost the contest for your lease.

  17. Compare payments and months between your two sources. In leasing, the payment and months that you pay, are the deciding factors, with all other things being equal. The cheapest payment will be the most economical leasing source at that point in time.

  18. Call up your non-web source and negotiate on the phone for a lower payment. Leasing companies with a physical location (brick and mortar) virtually always have room to negotiate. And don't be shy. Your leasing company is probably making a maximum profit on their first lease quote (a list-price sale) – thousands of dollars worth. If the dealership had agreed to $400 per month, try for $350 per month, and tell the dealership you are going to lease from some source within twenty-four hours. Leasing companies know that eighty percent of the people who don't lease at this point, won't. Use this for pressure.

  19. If you're being really stingy with your money, go back to the alternate company and try to negotiate their monthly payment down. Purely online leasing companies are trying to learn how to negotiate on the web. They don't like it. But if you're insistent, you may see their price drop, too.

  20. Make your choice. If your choice is an online lease company, be certain that company agrees to the wholesale figure on your trade in before agreeing to lease with them. Most online companies will avoid online appraisals, unless the appraisal is so low it's assured of a high profit on the trade. For instance, if the average wholesale value of the car quoted by NADA Guides or Edmunds is $4,000, the online company probably won't need to look at your vehicle if you will accept $3,000 for it without an appraisal. By email, tell the online company you'll be glad for them to appraise your vehicle in person, but you won't lease from them unless the figure matches its true wholesale value. Many of these companies will send an appraiser to your home or business.

  21. Regardless of the source, do not be talked into evaluating the condition of your trade-in. Don't fill out any self-appraisal forms. You are not a mechanic and are in no position to guarantee its reliability. Companies are using self-appraisal forms to obligate you down the road for financial liability.

  22. Be prepared for an add-on pitch. Expect to be pressured for things you won't need that carry excessive dealer profit. Don't go for it.

  23. If you are leasing a vehicle for more months than the vehicle's 100% warranty, you might want to consider purchasing a service agreement. Trouble is, you'll probably have to pay for more months of coverage than you need. You decide. If you're dealing with an online company, some of these folks will at the last minute try to add service agreements, accessories, or other "special value" packages on the paperwork package they normally send you. Don't fall for it.

  24. Actually read the lease paperwork. Important figures change magically at dealerships and on-line sources alike. Vehicles have even been known to change – and if you don't catch the change, you're stuck.

Take the vehicle for a ride!


Auto Leasing Home  /  Back  /  Next