How to Lease a Car With 0 Down Payments

With leases, driving a car off the lot with zero down payment is quite possible. With auto loans, it is much more difficult to drive that same car off the lot with zero down. Lease payments are designed to cover the initial depreciation of the car, namely the depreciation that occurs during the lease. In contrast, loan payments are designed to help pay for the entire purchase price of a car, plus interest. Even with a long five year loan, the cost of financing the car is usually far more than the depreciation during a typical two year lease term.

Difficulty:

Moderate

Instructions

Things You'll Need

• Good credit
• Willingness to accept a higher monthly payment

1. Select a car that is expected to depreciate less. If the depreciation is low enough, your monthly lease payments can be sufficient to cover the depreciation during the lease without having to resort to a down payment. This also means you should avoid cars that depreciate more.

2. Negotiate a lower price for the car, which is called the capitalized cost. The capitalized cost is just as negotiable as the price of a car in a standard purchase. The lower the capitalized cost, the more likely the lease can be written without a down payment. The capitalized cost should be much lower than the MSRP of the car.

3. Negotiate a lower money factor, sometimes called the lease factor, which functions as the interest rate paid to the leasing company for buying the car from the dealer. The money factor should be similar to current interest rates paid for an auto loan. As with loans, the buyer's credit, if less than desirable, could adversely affect the money factor that can be offered.

4. The down payment for a lease is called a "capitalized cost reduction." The capitalized cost reduction is needed when the depreciation cannot be covered by the monthly lease payments. This usually occurs with leases that advertise a very low monthly payment or if the capitalized cost is at the MSRP price.

5. If all of the above is not enough to result in a zero down payment, offer to pay a higher monthly payment. Pay a monthly amount high enough to pay for the entire cost of the lease so that there is no down payment.

Tips & Warnings

• Credit scores still matter with a lease. The leasing company is buying the car from the dealer and needs to be paid for the use of their money. Bad credit will make your lease payments and down payment higher.

Resources

• Read this Article in Spanish