How to Lease a Car in 6 Easy Steps

A car lease is a type of vehicle financing that gives you the ability to use a car for a set period of time; you'll pay a small set of fees up front, then another payment each month for the duration of your lease. Think of car leasing like renting an apartment; while you are renting, you can use the vehicle as though you own it, but unlike a car loan (or in the case of property, a mortgage) you do not own the vehicle once your lease period is over.

You'll need proof of insurance, your credit score, a valid driver's license, and in some cases a cosigner to lease a car. You'll also want to ask yourself some questions about what you are looking to get out of your car lease.

• Do You Want to Keep the Same Car For the Foreseeable Future?
• How Well Do You Maintain Your Vehicle?
• Are You Okay With Extra Costs?
• What Type of Warranty Do You Want?
• Do You Want to Own Your Car?

Determining whether you want to lease a vehicle depends on your answers to these questions, what your budget is, and how favorable your lease terms are.

How much you'll pay for your car lease varies from dealership to dealership. Your specific costs will be determined by your lease terms. These terms will determine how much money you'll pay over the course of your lease, and what components will determine your various fees and payments. There are four main elements that make up lease terms: Capitalized Cost, MSRP, Interest Rate, and Residual Value.

• Capitalized Cost: The capitalized cost is the residual value of the vehicle deducted from what the dealer paid the manufacturer for that vehicle. This will be the overall price you would pay for the car, and you can negotiate to bring this price down.
• MSRP: Manufacturer's suggested retail price, or MSRP, is a number set by the manufacturer based on what they believe the vehicle is worth. While this price can't be negotiated, it's only a suggestion; dealers can set whatever price they choose once the car is on their lot.
• Interest Rate: The interest rate is set by the manufacturer but often raised by dealers to increase their profits. The higher the interest rate, the more money you'll pay each month and overall. Make sure to confirm you are getting the proper rate before signing any paperwork.
• Residual Value: The residual value at the end of your lease is how much the car will be worth at a future date. It may affect the overall costs you pay and your monthly payments. If the residual value is higher, you may get a payment from your dealer; if it's lower, you'll be the one paying. Residual value can also factor into your monthly interest charges, depending on the terms of your agreement.

Step #1: Choose Your Car

The best place to start when leasing a vehicle is to choose what your ideal car would be. Think about what would best suit your needs: do you need plenty of seats for the kids? A storage space for tools? Or maybe you want something sleek and sporty? Whatever your requirements are, finding your vehicle will allow you to search for dealerships that have what you're looking for.

Step #2: Check Out The Car

Once you've found a dealer that has a car you want, go in and check out the vehicle. If the dealership gives you the option, test drive the car to see how it feels on the road. If possible, get the car inspected. This often isn't possible, so the next best thing is to get a vehicle history report. This will allow you to get a better idea of the car's accident history, and mileage.

Step #3: Compare Quote

Now that you've gotten a quote from the dealer for your car, shop around a bit. Find several other dealerships that offer the same make and model and see what they offer you for monthly payments, MSRP, capitalized cost, residual value, and every other facet of your lease terms. Getting multiple quotes gets you a better deal and can make negotiating your lease terms easier. Use GoodCar's lease calculator to get all the facts before you shop.

Step #4: Negotiate Lease

Let your dealer present lease terms and compare them to the offers you had from other dealerships. Take the two most competitive, and see who is willing to shave the most off your monthly payments. Lease terms are not set in stone, and negotiating can save you hundreds or thousands in the long-term. Stand firm with your price point, but be prepared to get rejected if you low-ball them.

Step #5: Settle On Terms

Now that you've chosen the best deal and negotiated even better terms, it's time to settle on your lease. You'll be discussing not only the monthly payments, but how much is due at signing, the length of the lease, any restrictions on mileage, buy-out price, early termination fees, and many other facets. Some of these terms will be negotiable (like the monthly payments, amount due at signing, allowable mileage per year, and terms for excessive mileage) and some will not (usually the early termination fees, and set price points like the MSRP.)

Step #6: Finalize Your Lease

You've chosen a vehicle, shopped around, negotiated a better lease, and settled on the terms. Now it's time to sign the paperwork. Read through every part of your lease carefully before signing on the dotted line, and make sure you've provided any documents they require. You'll usually need to give a driver's license and proof of insurance before the car can leave the lot. Once you leave, make sure to keep a copy of your lease agreement somewhere safe. From there, it's just a matter of making the monthly payments and following the tenants of the lease agreement . Drive safely!