How to Lease a Car With No Money Down
Leasing a car with no money down is not only possible -- it's also a very good idea for a variety of reasons. Asking dealers to quote you pricing with not just no money down but no money at all due when you take possession of the vehicle -- also called "sign and drive" -- makes it significantly easier to compare prices from dealer to dealer and even from vehicle to vehicle. From an insurance standpoint, you're less likely to be be out of pocket if you total a vehicle if you don't put money down, as gap insurance covers only the difference between what you owe and the current value. It does not reimburse you for your down payment.
Ehow asked Jodi Furman of the award-winning blog, LiveFabuLESS.com (Link below) to provide readers with an easy to follow roadmap for leasing a car.
Furman has taught millions of readers a modern and doable way to live an upscale life without the price through her blog and TV appearances. She has an MBA from Columbia Business School and is a married mom with three young kids plus two dogs and two cats.
Leasing 101
Familiarize yourself with leasing lingo, and use it when talking to anyone at the dealership. Being a knowledgeable consumer ensures that the only ride that the dealership is taking you on is a test drive.
Unlike buying -- when you're paying for the entire cost of the vehicle -- when you lease you pay only the difference between the car's current selling price (referred to as the capitalized cost) and the estimated value at the end of the leasing term (called the residual value). There are also fees and incentives, though. Fees must be added to the amount financed. Incentives, also called capital cost reductions, will be subtracted from the total amount financed.
Most people focus only on the monthly payment of a lease, but it's important to understand how that payment is derived. A lease payment is calculated using math, not magic. Input the factors into the calculator available at leaseguide.com and let the calculator do the math for you.
FabuLESS Tip: Dealerships may include additional fees or neglect to include incentives in your quote. Don't sign until you've confirmed that the details and the math add up.
Narrow Your List
Determining which vehicles are in your price range can be challenging, as the manufacturer's suggested retail price or the cost of the vehicle has less to do with the monthly cost of the lease than you might expect. As you're financing the difference between the selling price and the residual value at the end of the leasing term, only the difference between the two matters. That's why you'll find that at times more expensive vehicles -- especially those that retain their value better -- often lease for less than other, less expensive cars.
Also, residual values tend to be higher for lower trim levels -- so an entry-level luxury car might have a significantly higher residual value than a top-of-the-line version of an economy car, making the lease payments for both closer to each other than you would expect, or even rendering the luxury vehicle less expensive.
A great source of information about current lease offers is found in Edmunds.com's online forums, through which experts and consumers share their opinions and provide specifics about current lease offers.
Many advertisements for low lease rates are misleading. Invariably, those leases require a large down payment and a number of fees due at signing, and they generally have very little mileage allotted per year. Those additional costs are found in the fine print or the hushed voice at the end of the advertisement.
FabuLESS Tip: Contact your insurance agent to get a quote on each of the vehicles you're considering. Comparable vehicles might have widely different costs to insure.
FabuLESS Tip: Compute the total estimated cost of each vehicle per month. Add up all of the following:
• Cost of the lease, including tax.
• Insurance cost.
• Estimated gas costs: If you drive an average of 1,000 miles per month and the vehicle gets 25 mpg, you'll be purchasing 40 gallons (1,000 / 25 = 40) per month. If the vehicle gets 15 mpg, you'll be purchasing 67 gallons per month.
• Estimated maintenance costs (some manufacturers cover basic maintenance).
Once you've calculated and added up all of the costs, you might be surprised to find that, at times, the vehicle with the lowest lease rate may not be the best financial decision due to increased insurance costs, gas costs, and/or maintenance costs. By looking at the whole picture, not just the leasing costs, you'll be able to make a more educated decision.
