GETTING STARTED 2005 Car Buyer's Guide Tune Up Your Car Buying Skills How to Negotiate a Lease Smart Shopper's Guide to Auto Insurance MORE... CAR TOOLS Kiplinger's Car Finder How much will my monthly car payments be? Should I finance or pay cash for a car? Which is better: a new or used car? Should I lease or purchase a car? Which is better: a rebate or special dealer financing? LEASING TOOLS LeaseWise car-leasing service Should you buy or lease? What will your lease payments be?

CARS
Decipher Lease Lingo
by Mark Solheim

Bargaining hard for the lowest price is just as important when you lease a car as it is when you buy. Leases you see advertised on TV or in the newspaper are typically "subvented" leases -- that is, subsidized by the manufacturer. (For details on manufacturer leases as well as other incentives and rebates, visit Edmunds.com and enter your zip code. Deals vary by region.) You may have little bargaining room with a subvented lease.

But if you're negotiating a lease that isn't subvented, nearly every cost should be on the table. Some experts recommend that you request a lease with zero down payment and zero drive-off fees. This raises your monthly payment, but you won't have to write a fat check to the dealer -- and part of the appeal of leasing is to keep your cash flow strong.

The key to your monthly payments is the difference between the cost of the car and its residual value (that is, the car's projected worth when you turn it in). That difference is the value you'll use up while you drive the car, and what you'll pay for, along with the cost of financing the deal.

Pay close attention to the capitalized cost -- the price of the car written into the lease. Gross cap cost includes the price of the vehicle, fees, extended service plans, gap insurance premiums and any other add-ons. Adjusted cap cost is the gross cap cost minus reductions for trade-in, cash down payment and rebates. That's the amount you actually finance.

The lower the capitalized cost and the higher the residual, the lower your payments. After you negotiate the price, ask the salesperson to check leasing deals offered by several financing companies. One may build in a higher residual or a lower interest rate (in leasing, it's called the money factor) and save you money.

Other fees you'll encounter include the acquisition fee, which is included in most lease transactions and is either paid up front or included in the gross capitalized cost. It may be also be called a bank fee, an administrative fee, or an assignment fee.

The disposition fee or disposal fee is often charged to defray the cost of preparing and selling the vehicle at the end of the lease. And most leases charge a security deposit. If you've met your obligations under the lease, it should be refunded to you when you turn the car in.