What are the benefits of making a down payment when leasing a car?

There are a few benefits to making a down payment when leasing a car. First, it can help to lower your monthly payments. Second, it can reduce the amount of money you owe on the lease, which can make it easier to get out of the lease if you need to. Third, it can improve your credit score. However, it is important to note that a down payment can also reduce the amount of money you can save on interest.

What are the drawbacks of making a down payment when leasing a car?

There are a few drawbacks to making a down payment when leasing a car. First, you will lose the money you put down if you total the car or if you decide to end the lease early. Second, you will not earn any interest on the money you put down. Third, you may not be able to take advantage of all the lease incentives if you make a down payment.

How much should I make a down payment when leasing a car?

There is no one-size-fits-all answer to this question. The amount of money you should make a down payment depends on a number of factors, including your credit score, the type of car you are leasing, and the terms of the lease. It is important to speak with a financial advisor or a car leasing expert to get advice on how much money you should make a down payment.

Should you make a Down Payment when you Lease a Car

Q: Should you make a down payment when you lease a car?

Whether or not you should make a down payment when you lease a car depends on a number of factors, including your credit score, the type of car you are leasing, and the terms of the lease. In general, a down payment can help to lower your monthly payments, but it can also reduce the amount of money you can save on interest. It is important to weigh the pros and cons carefully before making a decision.

Research Center
Car Leasing Research Articles
Should You Make a Down Payment When you Lease

If you've never leased a vehicle before, one of the questions on your mind has got to be about the down payment. After all, when you purchase a car, you're used to putting thousands of dollars down up front. It doesn't have to be that way on an auto lease. In fact, you can actually lose money when you put a big down payment on a lease. Let's say you put $3,000 down on a lease car and it is stolen or the vehicle is totaled in an accident. Even if you have GAP insurance, your down payment is not always protected. Imagine losing that three grand.

Is a Big Down Payment Worth it?

The short answer is that you don't have to put a lot of money down up front to lease a vehicle. In fact, if the lease terms are good, you may want to put down the least amount possible. Remember that your lease payment involves the difference between the vehicle's selling price when new and its residual value, which is the amount it is worth at the end of the lease. This is the amount you would pay if you decided to purchase the car at the end of the lease.

You add in the money factor which is the financing cost of your monthly lease payment. It's similar to the interest paid on a home mortgage. There will also be a few fees and taxes thrown in. Add it all together and you essentially have your lease payment amount. You can use an auto lease calculator such as the one offered by Bank Rate at https://www.bankrate.com/loans/auto-loans/auto-lease-calculator/

Why make a Big Down Payment?

When you are buying or leasing a car, the only reasons you would consider putting down money up front are to lower your monthly payment, lower interest charges, to get a loan approved, to get a lower interest rate, or to avoid being upside down on the car.

In the case of an auto lease, a large down payment will not save you a ton of money on your monthly payment and a low money factor means lower interest charges. Plus, car leases generally come with GAP insurance that will pay for the unpaid balance if the car is totaled or stolen. If you have good credit, you can get approved for the lease without putting down a lot of money. And remember, making a bigger down payment will not get you a lower money factor.

Let's say you are leasing a car with an MSRP of $40,000 and a negotiated final price of $38,000. If you put $3,000 down, and figure that the car value at the end of the 36-month lease is $20,500, your monthly payment would be around $540. However, if you have good credit and don't have to put down anything as a down payment, your monthly payment would be around $630. So, you would pay $90 more per month but save $3,000 up front that you could possibly lose if the car is totaled in a wreck or stolen. You could use that three grand to pay off higher interest credit cards.

Not all auto lease deals have special low money factors. If you're leasing a car with a high selling price and a high money factor, you may be better off putting money down up front. But if you're leasing a moderately priced car with special incentives and low rates, beginning the lease with little or no money down may work for you.

Let Lithia Help!

With over 75 years of experience in personal transportation and over 260 auto dealerships from coast-to-coast, Lithia Motors has the answers to all your auto leasing questions. Let us help get you on the road with a lease deal that is tailor made for you.

Should you make a Down Payment when you Lease a Car

Final Thoughts