You Can Lease A Car With Little Or No Down Payment: What A Concept!September 23, 2017
Leasing really is the way to drive for less out of your pocket! We have already talked about the lower monthly payments that leasing makes possible. Now let’s focus on the other financial issue that keeps many people from driving a new car: the down payment.
With the steadily increasing prices of new cars, it is now very difficult for many car shoppers to come up with the down payment required to swing a financing deal. Recent studies have shown that the average new car transaction price is over $34,000, which means that even a 10 percent down payment requires you to come up with $3,400! And a 20 percent down payment, which is sometimes required, takes that up to $6,800. That’s a huge amount of money!
So what do people do? They deplete their savings, they borrow from relatives, or maybe they put it on a credit card (a particularly bad idea). However they raise this large sum, they have made their own personal financial situation much worse.
A Smaller Deal That Costs You Less
The beauty of leasing is that you are dealing with a much smaller transaction. Because you are paying only for the use of the car for a few years, and not the entire car, you have the flexibility of putting much less, or sometimes nothing down.
There is nothing magical about the way this is done. The less you put down, the more gets allocated to your monthly lease payment. No one should be surprised that putting little or nothing down will bump your payment up.
As a rule of thumb, every thousand dollars you put down up front will reduce your monthly payment by $40 to $50. It works in reverse too, so every thousand dollars you don’t put down will raise your monthly payment by $40 to $50. Zero down makes your payments higher, but remember – you still have the money that would have gone to the down payment!
Now You’re In Much Better Financial Shape
But what it does for your own personal cash flow can be miraculous! Because you leased instead of purchased, you don’t have to find or use that large lump sum. If you have it in your savings, it can stay there, or you can use it for something else.
When you add this benefit to the lower monthly payments that leasing lets you enjoy, you come out dollars and miles ahead. Suddenly your personal financial situation has greatly improved, because you held onto your money and didn’t use up your savings. That’s another basic concept of sound financial management: hold onto your money as long as you possibly can!
Another Reason For Zero Down: That Big Down Payment Could Disappear
Let’s say you put several thousand dollars down on a lease to get yourself a lower monthly payment. A few weeks later, you’re cruising along, when another car plows into you and totals your brand new leased car! It has been destroyed. The leasing company that owns the car gets paid out by the insurance company, so they are happy. And you just lost that big down payment – it went up in smoke! Now you’re without a car and your money! Don’t let this happen to you!
A Few Words Of Warning
If you have a problematic credit rating, you may find it difficult to get a zero down deal. If this happens in one place, keep shopping – different companies and brands can have different standards as to who gets a zero down lease. If you can’t get zero down anywhere, try to negotiate the smallest down payment that the leasing company will still make the deal with. Keep shopping until you can’t get it any lower. That will be your best deal.
Also, zero down does not always mean than you don’t have to pay anything at all to drive away. There may be document fees, registration fees and other costs that must be paid up front to get you behind the wheel. Some leases may require the first month’s payment up front. All these required costs are known in the trade as “amount due at signing.” Once again, shop around and compare the fees and the “amount due at signing” from place to place. All things being equal, the lowest amount out of your pocket at the start wins.