Leasing has become a very popular option for consumers who want an economical alternative to buying a new car. Consequently, lending institutions have begun to offer more financing options. However, leasing program rules change, too, and not all lenders offer the same options. Here are seven strategies for keeping your monthly payments as low as possible when shopping for a leased car.

1. Choose a Car with a High Residual Value

The residual value of your leased car is its value at the end of your lease period. Leasing companies make this prediction at the beginning of the lease and the greater portion of your monthly payments goes toward paying off the vehicle depreciation. Since many leases are for three years and most new cars lose roughly half their value during the first three years, your payments will be lower on a car that retains its value well.

Generally, European and Japanese cars retain their values better than domestic cars. Specific cars with good residual values include the following:


2. Lower the Mileage Allowance

The number of miles you drive also affects the car’s residual value. The lower the miles, the more the vehicle will be worth at the end of the lease period. Ask your leasing agent what the annual mileage allowance is on your car of choice and then negotiate downward. Naturally, this is feasible only if you don’t drive a lot. Keep in mind that if you go over your mileage allowance, the penalty fees may well offset any savings you gained with this strategy.

3. Increase the Amount of Your Security Deposit

The security deposit on a leased car is refundable at the end of the lease and usually is approximately one month’s payment. Making multiple security deposits can save you hundreds of dollars over the life of the lease. Since the leasing company’s risk is less, your interest rate should be lower, plus you’ll get a large security deposit refund when you turn in the car. Find out if your lender offers this option and, if so, the limitation, if any, on the number of security deposits you can make.

4. Raise the Interest Rate

This seems counterintuitive, but if you think you’ll want to buy your leased car substantially before the end of the lease period, this may be a good strategy for you. Negotiating a higher interest rate only raises your monthly payment by a few dollars and may result in your leasing company waiving the acquisition fee. This fee normally is around $650 and is paid upfront to cover administrative costs.

5. Look for Lease Specials

Shopping at the end of the model year often will lead you to lease specials offered by a manufacturer and/or leasing company like https://www.worldwideautomobile.com/. Such specials are on selected makes and models. Normally you’ll need a high credit score to be eligible for a special, but if that’s no problem, you’ll often find reduced lease prices, reduced interest rates, and/or artificially high residual values.

6. Lease a Used Car

Most lease shoppers look for a new car, but leasing a late-model low-mileage used car can be a very economical alternative. If it’s three years old, it already has lost approximately half of its original value, so you’re paying for its current value and its further depreciation over the life of your lease. A car’s depreciation rate usually slows down after the first three years, making a used car’s residual value higher than that of a new car. The main drawback to leasing a used vehicle is the potential for repair costs since the original manufacturer’s warranty probably has expired.

7. Consider One-pay Leasing

If you were planning on paying cash for a new luxury car, consider one-pay leasing instead. You’ll save much of the immediate cash outlay required for an outright purchase and can buy your leased car at the end of the lease period, giving you more liquid funds in the interim. This strategy also works well for people like students or workers who enter the country for a relatively short period and have generous sums of money but little, if any, established credit.

Leasing is a good option for many people. Consider the advantages and disadvantages of both leasing and buying the next time you’re in the market for a car and make the choice that best fits your needs.