Key Takeaways
- Negotiate the cap cost (selling price) down—this directly lowers your monthly payment
- Ask for the "base" or "buy rate" money factor—dealers often mark this up
- Residual value is set by the manufacturer—you can't negotiate it, but verify it's correct
- Avoid large down payments on leases—they're risky if the car is totaled
- Always compare deals using "zero drive-off" monthly payment for accuracy
- Manufacturer rebates should reduce your cap cost, not go to the dealer
Leasing can be a smart way to drive a new car—but only if you negotiate effectively. Most people accept whatever monthly payment the dealer quotes without realizing leases are just as negotiable as purchases.
The key is understanding the three components that determine your lease payment: cap cost, money factor, and residual value. Master these, and you'll save hundreds per month.
Understanding Lease Payments
Your monthly lease payment is calculated from three main factors:
The Lease Payment Formula
Monthly Payment = Depreciation + Rent Charge
Depreciation = (Cap Cost - Residual Value) ÷ Term
Rent Charge = (Cap Cost + Residual Value) × Money Factor
This means you have two main levers to reduce your payment:
- Lower the cap cost (reduces both depreciation and rent charge)
- Lower the money factor (reduces rent charge)
The residual value is set by the manufacturer's leasing company and generally isn't negotiable—but a higher residual is better for you because it means less depreciation.
Negotiating the Cap Cost
The capitalized cost (cap cost) is essentially the "selling price" of the car for lease purposes. This is the most important number to negotiate.
How Cap Cost Affects Your Payment
Every $1,000 you negotiate off the cap cost saves you roughly $28/month on a 36-month lease (plus the rent charge savings). On a 3-year lease, that's over $1,000 in savings.
Cap Cost Negotiation Checklist
- Negotiate the selling price before mentioning you want to lease
- Get quotes from multiple dealers—let them compete
- Ensure all manufacturer rebates reduce the cap cost
- Refuse dealer add-ons that increase cap cost
Watch Out for Cap Cost Additions
Dealers can add fees and add-ons to the cap cost, increasing your payment. Common additions to refuse:
Refuse These Add-Ons
- • Paint/fabric protection
- • VIN etching
- • Dealer prep packages
- • "Protection packages"
- • Nitrogen tire fill
- • Window etching
Negotiate Separately
- • Acquisition fee (sometimes waived)
- • Wear & tear protection
- • Excess mileage packages
- • Wheel/tire protection
Understanding & Negotiating Money Factor
The money factor is the interest rate on your lease, expressed as a small decimal. To convert to APR, multiply by 2,400.
Money Factor to APR Conversion
Money Factor
0.00125
Equivalent APR
3.0%
Formula: 0.00125 × 2,400 = 3.0% APR
How to Get a Better Money Factor
Dealers often mark up the money factor from the "base" or "buy rate" set by the manufacturer's leasing company. Here's how to negotiate:
- Ask for the base rate: "What is the base money factor from [manufacturer] Financial?"
- Check manufacturer specials: Many brands offer reduced money factors as lease incentives
- Good credit matters: The best money factors require excellent credit (typically 720+)
- Compare to loan rates: If the equivalent APR is much higher than auto loan rates, push back
Script: Asking for Base Money Factor
You: "What money factor are you using for this lease?"
Dealer: "0.00175"
You: "That's 4.2% APR. What is the base money factor from [BMW/Toyota/Honda] Financial? I'd like you to use the buy rate without any markup."
Residual Value: What You Need to Know
The residual value is the car's projected value at the end of the lease, expressed as a percentage of MSRP. This is set by the manufacturer's leasing company and is not negotiable.
Why Residual Matters
A higher residual means you pay less depreciation, which lowers your monthly payment. This is why some cars lease better than others—vehicles with high resale values (Toyota, Honda, Lexus) often have better residuals.
Residual Value Tips
- Verify the residual: Ask the dealer for the residual % and check it against manufacturer lease programs
- Consider term length: 36-month leases often have the best residual percentages
- Watch mileage limits: Higher mileage leases have lower residuals (more depreciation)
The Truth About "Zero Down" Leases
Many lease ads show low monthly payments with "due at signing" amounts of $2,000-$4,000. This is misleading. To compare lease deals fairly, you need to understand true zero-down leasing.
Why You Shouldn't Put Money Down on a Lease
If your leased car is totaled or stolen, insurance pays off the lease—but you don't get your down payment back. That money is gone. Instead, negotiate a lower cap cost and keep the cash in your pocket.
What "Due at Signing" Really Means
"Due at signing" typically includes:
- First month's payment (required)
- Acquisition fee ($595-$1,095, sometimes waived)
- Registration/title fees (required by state)
- Down payment / cap cost reduction (optional—and risky)
- Security deposit (often waived for good credit)
A true "zero drive-off" lease means you only pay the first month and mandatory fees at signing—no cap cost reduction.
Script: Getting True Zero Drive-Off Quote
"I want to compare this deal accurately. Please quote me the monthly payment with zero cap cost reduction—just first payment, acquisition fee, and registration. What would the monthly payment be with true zero drive-off?"
Lease Negotiation Scripts
Use these word-for-word scripts when negotiating your lease:
When They Won't Break Down the Numbers
Dealer: "Your monthly payment will be $450."
You: "Before we discuss payments, I need to see the lease worksheet with cap cost, residual value, and money factor broken out separately. I won't agree to any payment without understanding how it's calculated."
When the Money Factor Seems High
You: "This money factor of 0.002 equals 4.8% APR. I can get an auto loan for 3.5%."
You: "What is [Toyota/BMW/Honda] Financial's base money factor? I want the buy rate without any dealer markup. If you can't match competitive financing rates, I'll consider purchasing instead."
When They Add Unwanted Items to Cap Cost
Dealer: "This includes our $1,200 protection package."
You: "Remove that from the cap cost. I didn't ask for it and I'm not paying for it. If it's already installed, I need an equivalent reduction in the vehicle price."
When Rebates Aren't Reducing Cap Cost
You: "The manufacturer is offering a $2,000 lease cash incentive. I want to confirm this is reducing the cap cost, not being kept as dealer profit. Please show me the cap cost before and after the rebate."
See What Others Are Paying
Compare your lease offer to real deals from other buyers. CarWhere shows actual lease payments, not advertised prices.
Browse Real Lease DealsFrequently Asked Questions
Can you negotiate the price of a car lease?
Yes! The cap cost (selling price) is absolutely negotiable. Negotiate it down just like you would a purchase price. Every $1,000 off saves roughly $28/month on a 36-month lease.
What is money factor and can you negotiate it?
Money factor is the interest rate on a lease. Multiply by 2,400 to get the APR equivalent. Dealers often mark up the base money factor, so ask for the "buy rate" from the manufacturer's leasing company.
What is a good money factor on a lease?
It depends on current interest rates. Multiply the money factor by 2,400 to get the APR. If auto loans are at 5%, a money factor of 0.00208 (5% APR equivalent) is reasonable. Lower is better—some manufacturers offer promotional money factors as low as 0.00001.
Should I put money down on a lease?
Generally no. Large down payments are risky on leases—if the car is totaled or stolen, you lose that money. Instead, negotiate a lower cap cost and keep your cash. Opt for a true zero or minimal drive-off lease.
What is residual value and can I negotiate it?
Residual value is the car's projected worth at lease end, expressed as a percentage of MSRP. It's set by the manufacturer's leasing company and is NOT negotiable. Higher residuals mean lower payments.
What fees should I expect on a lease?
Expect: first month's payment, acquisition fee ($595-$1,095), and registration/title fees. You can often negotiate waiving the security deposit and acquisition fee. Never pay for unwanted add-ons added to the cap cost.
How do I compare lease deals from different dealers?
Always compare using the "zero drive-off" monthly payment—this removes the effect of different down payments. Also compare cap cost, money factor, and residual value separately to see where each dealer is competitive.
The Bottom Line
Leasing can be a great deal—but only if you negotiate. Focus on reducing the cap cost, getting the base money factor, and avoiding unnecessary fees. Always compare deals using the true zero drive-off payment, and never put a large sum down on a lease.
Armed with these strategies, you'll be able to negotiate a lease payment that's hundreds lower than what the dealer initially quotes.
What Are People Actually Paying?
Don't guess if you're getting a good deal. See real lease payments from real buyers and know exactly what a competitive lease looks like.