10 Steps to Leasing a New Car

Steps for leasing a new car

New: Update on current car buying climate
1. Get acquainted with leasing
2. Design your lease deal
3. Determine your budget
4. Check for manufacturer lease deals
5. Find the exact car to lease
6. Use our calculators to get an estimated monthly payment
7. Shop the internet department
8. Test-drive the salesperson
9. Negotiate your best lease payment
10. Review and sign the paperwork

Summer 2022 update: The ongoing semiconductor chip shortage and consequent vehicle shortage have caused prices for both new and used cars to hit record highs.

"Shrunken inventory continues to wreak havoc on both the new and used vehicle markets," said Jessica Caldwell, Edmunds' executive director of insights "Shoppers who can actually get their hands on a vehicle are committing to never-before-seen average payments and loan terms."

As a result, car shoppers today face a limited selection and price hikes from either dealer-added (often non-negotiable) accessories or "market adjustments." Discounts of any sort are scarcer than the cars themselves, leaving buyers with no negotiating power. If you don't like the price of a car, the dealership is betting the next person will. This leads to a greater sense of urgency to make a quick decision on a deal since the car may not be there if you go home to think about it.

These are far from normal times in terms of both the selection of cars available and the lack of discounts you may encounter. If you need a new vehicle today, we suggest starting your shopping process sooner rather than later, as analysts predict that the chipset shortage will likely affect pricing and inventory through this year and into 2023.

If you're shopping for a new or used car in today's difficult marketplace, please see "Car Buying Tips for 2022" for our experts' targeted, data-driven advice. Note that the article below was originally written before the chip shortage, back when vehicle prices were relatively stable and predictable. If the shortages continue, there may not be a so-called "best time to lease" for the foreseeable future. The best time in the current market is when you find a dealer that has the vehicle you want and is willing to sell it to you at MSRP or better without any options that you may not need.

That said, many of the major elements of this story still ring true. You'll still need to research the car you want, get preapproved for a lease, and know how to handle the transaction.

1. Get acquainted with leasing

Car leasing is really just like a car rental, but for a longer time period and with some extra fees. Many people prefer leasing to buying because it allows them to drive a new car for less money than if they purchased it. You should have a good idea by now which car to lease, thanks to "10 Steps to Finding the Right Car for You." If you are still undecided, review that article and then come back after you have made your choice. And in this first step, it also might be helpful to review some of the other pros and cons of leasing to make sure it is the right financing method for you.

Also, if some of the terminology you encounter is confusing, consult our leasing glossary. Finally, if you're in a hurry, read our "Quick Guide to Leasing a New Car."

The next steps will tell you how to locate and negotiate a good monthly payment for the car you want to lease. It will also introduce you to Edmunds special lease offers, which will make the process much faster and stress-free.

2. Design your lease deal

Edmunds recommends that people lease for no longer than three years, so your car will always be protected by the manufacturer's three-year bumper-to-bumper warranty. Some people are tempted to extend their leases to four and five years to reduce the monthly lease payment. But this means you're investing more money in a vehicle that will never be yours and might need costly repairs.

You should also know that most lease contracts include 12,000 miles a year. So if you drive more than 36,000 miles in three years, you will be charged between 15 and 30 cents for each additional mile. You can buy extra miles up front, which usually cost less than the overage fees and have this rolled into your lease payment.

Lease contracts usually call for a down payment, which is also called a "cap reduction payment" Often, advertised leases tend to list high down payments. However, we recommend you pay the first month's payment and any remaining fees to start the lease. These are often called the "drive-off fees." So to summarize, the Edmunds recommended lease is: three years, 12,000 included miles per year, and paying the drive-off fees as your down payment.

One last thing: It's smart to ask your insurance agent for a coverage quote. Lease companies require higher levels of coverage for leased cars than many individuals carry for cars they've bought. The lease company's liability is higher, and it passes this extra expense along to you.

3. Determine your budget

Make sure you have enough money in your budget to account for the down payment, monthly payment, fuel costs and insurance. Leasing does allow you to get a better car for the money, but keep in mind that in 2022 and likely 2023, leasing has grown increasingly more expensive due to the vehicle shortage and higher-than-typical used car values. We recommend you get a good handle on pricing before deciding to lease.

To illustrate how much the market has changed, here are the average monthly lease payments per year, according to Edmunds' data.

These days it's worth comparing the monthly payments on a lease versus buying the car and financing it. The gap between the two has narrowed in recent years, and it may be a better deal to buy the car than lease since you'll likely have some equity in the car in a few years.

4. Check for manufacturer lease deals

Many carmakers periodically offer highly discounted lease specials. However, the advertised specials might have additional costs in the fine print of the lease ad. You should always check to see if the promised monthly payment includes sales tax and fees and if it also requires high drive-off fees, which are similar to a down payment when you buy a car. Check Edmunds' Incentives and Rebates section for current offers.

5. Find the exact car to lease

If a lease offer isn't available for the car you want, you can locate other cars to lease by clicking on the "New Car Pricing" tab above any page on Edmunds. After you enter the year, make and model, scroll down on the next screen to "See all for sale." It will display several cars for sale at local dealers. You can narrow down the list of vehicles by color, features, trim price and more. If you are interested in one of these cars, contact the dealer to make sure it is available. If there are several dealerships offering the same car, you may be in a better position to negotiate a better lease payment.

6. Use our calculators to get an estimated monthly payment

It's a good idea to estimate a possible lease payment yourself so you can spot a good deal as you continue shopping. When viewing a specific inventory page (this should have a VIN and a stock number) on Edmunds, scroll to the bottom where you'll see a buying and leasing calculator. If the buying tab is highlighted, click on the leasing one to bring up the proper calculator. You can change different factors such as the term, down payment and trade-in. This is not meant to duplicate the exact lease price but rather to give you a ballpark figure and see how the various factors can affect the payment. If you're ready to proceed, call, text or email the salesperson listed on the offer to confirm the car is still available and get final or "out-the-door" pricing.

7. Shop the internet department

Though some might like to browse cars in person, we strongly suggest that you shop through the dealership's internet department, which offers many advantages over the traditional car shopping experience. Using Edmunds, you can simultaneously send requests for price quotes from the internet managers at local dealerships. After you receive a car price quote, you'll need to follow up with an e-mail or phone call to get a lease quote (using the factors of three years, 12,000 miles per year and drive-off fees) so you can do an apples-to-apples comparison. Now, compare the quotes you get to your own calculated lease payments or the offers you received from Edmunds.

8. Test-drive the salesperson

As you call dealerships to locate your car, you should also test-drive the car salesperson. Ask yourself if you feel comfortable dealing with this person. Does he or she return your phone calls and answer your questions in a straightforward manner? Also, you should take a moment to read any available reviews of the dealerships you are considering.

9. Negotiate your best lease payment

You now have a handful of price quotes and an idea of the level of customer satisfaction at the dealerships you contacted. If you want to try to improve the deal, take the lowest offer, call the other dealers and see if they can beat that price. These days, however, there may not be much room to negotiate. If no one budges, you are at rock bottom.

Although we highly recommend using the internet department, many people still go to the car lot in person to make a deal. If you do so, make sure to take along your lease payment estimates and price quotes. Also, download Edmunds' mobile car buying app for any last-minute pricing and inventory research. Then, if the salesperson's on-the-lot price is too high, you can show the prices you've gotten from other dealerships. But make sure you accurately compare quotes by matching the down payment, the length of the lease and the annual mileage allowance.

Whichever method you choose, it is a good idea to ask the salesperson for a worksheet showing all the numbers in the deal. This will reveal any hidden fees and allow you to compare this offer to the quotes you have. And make sure that the quote lease includes sales tax to see what your full monthly payment will be.

One more thing: Before you say yes to the deal, tell the salesperson you are willing to lease if the dealership will have the car delivered to your home or office. This will save you time and allow you to skip the step of visiting the finance office to hear about additional products, such as alarm systems and fabric treatments.

10. Review and sign the paperwork

Whether you close the deal at home or at the showroom, the dealership will ask you to sign a contract and an array of documents. At the dealership, this will probably be done in a separate office by the finance and insurance (F&I) manager, who might offer you additional items such as prepaid maintenance plans, fabric protection, alarms or a vehicle locator. Some people might benefit from these extras, but determining a good price can be difficult. Read more about this in "Negotiating a Dealer's New Car Add-Ons."

If you have already seen a worksheet for the lease deal you've made, the contract should be a formality. Make sure the numbers in the contract match the worksheet and that no additional charges or fees were added. Understand what you are signing and what it means. Remember, once you have signed, there is typically no going back to "unwind" the deal. And finally, make sure the lease contract you are signing includes gap insurance to protect you if your leased car is stolen or totaled in an accident.

Now it's time to go out and put your knowledge into action. Just remember that the time you take to research your leasing decision will pay dividends over the years. You'll not only be driving a car that suits your needs, but you'll be saving money in the process.

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