Zero Down Car Lease – Explained

Is it possible to lease a car with zero money down?

 Lease with no down payment, and no cash up front

zero down leaseYes, it is very possible to lease a car with little or no up-front down payment cash — zero dollars down.

In fact most car leases, even those advertised with a “required” down payment, are also available with $0 down, possibly depending on credit requirements (see explanation below).

This is one of the benefits of leasing versus buying with a loan. Loans nearly always require a down payment, sometimes as much as 20%, or more if the buyer has bad credit. Leases usually do not.

However, without a down payment, monthly lease payments will be a bit higher since you are not pre-paying some of the lease obligation.

In general, your lease payment will decrease by about $40-$50 for every $1000 made as a down payment. So your trade-off is: down payment cash versus higher monthly payments.


Although most leases are structured so that a down payment is optional, some special lease deals offered by car manufacturers in monthly promotions may require a down payment in order to get the deal. You could get the lease with no down payment but the actual deal might not be as good because some of the lease parameters might change. You might not know this unless you used a tool such as the Lease Evaluator calculator in our Lease Kit to do comparisons.

For example, a special promotional lease might have a very low money factor and require a down payment (cap cost reduction). But without the cap cost reduction paid up front in cash, you might not be able to get the same low money factor. Since dealers don’t typically reveal the money factor, you would not know about the hidden change unless you used a comparison tool such as our Lease Evaluator, as previously mentioned.

Special $0 down leases from car companies

Some manufacturers such as Honda and Acura often offer special promotional lease deals both ways — with a down payment and without. Even though you pay a higher monthly payment with nothing down, it’s the same good deal — none of the lease parameters change.

A good lease deal is created by a discounted lease price, a low money factor, and a high lease-end residual. Whether or not a down payment is made doesn’t change these factors — and the value of the deal is the same.

See Zero Down Car Leases Are Back for more details and current $0 down car lease deals from car manufacturers.

Evaluate lease deals — free online tool

leasevaluecalcEven if you are offered a special lease deal with no money down, does that mean it is automatically a great deal? No, not at all.

It’s best to evaluate any car lease deal, regardless of how good it might look at first glance. A low payment or zero money down doesn’t make it a good deal. You could easily pay more than other customers for the same car.

Use our free online Lease Deal Calculator to determine whether a lease is a good deal or not. Use it to compare different leases and as a tool to help you negotiate better deals from dealers.

Down payment and amount due at lease signing can be different

Just a reminder about how leases work: when you sign your lease papers, you make a down payment (or not), pay sales tax on your down payment, make your first month’s payment, sometimes pay a security deposit (which you get back at lease-end), and pay any official fees required by your city, county, or state. in other words, a down payment (if any) is only a part of the total cash due at lease signing.

The total of all up-front cash for a car lease is called “amount due at signing” or “cash due at lease inception.” But notice that your down payment (if any) is only a part of the total “amount due at signing.” This important point is often not well understood.

This means that there can be differences between lease deals that offer “$0 down” and other deals that offer “$0 due at signing” or “sign and drive.”

Types of zero-down car leases

Here are the four basic forms of $0-down leases:

1. One form of such a deal might require no down payment (cap cost reduction) cash, but still require that you pay the first month’s payment, and official fees. Therefore, you still need some cash at your lease signing.

2. Another way it might be done is that the dealer can roll your first month’s payment into the lease, which makes your remaining monthly payments slightly higher, but you only pay official fees at your lease signing.

3. In another form of $0-down lease deals, like those sometimes offered by Honda, Acura, and others, you make no down payment and the car company makes your first month’s payment and you only pay official fees.

4. And yet another form of a “zero down” deal a dealer would even roll the official fees into the lease so that you pay absolutely nothing in cash at lease inception.

In summary, there are a number of different kinds of “zero down” leases.

You can check on current promotional lease deals, including $0 down deals, at our Best Car Deals web site.

Requirements to get a $0 down lease deal

“ Whether you ‘qualify’ for a no down payment lease directly depends on your credit score”

When car companies offer promotional zero-down lease deals, they often state that the deal is only available to “qualified customers.” In plain language this means customers must have good credit scores in order to get the deals.

Therefore, we suggest that anyone considering a special “zero-down” lease deal should already know their credit score ahead of time to avoid surprises in a dealer’s showroom. What’s your FICO score? Find out now when you check your credit report for $1 at Experian.com!

Summary

If you are considering a $0 zero-down lease deal, make sure you ask your dealer how it works because there are differences between such deals.

A lease deal that doesn’t require a down payment or up-front cash doesn’t automatically make it a good deal. It might make the deal more affordable up front, but it may not actually eliminate any costs.

The best way to determine if a lease deal is good or not is with the Lease Evaluator calculator, which is part of our optional Lease Kit.

 

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