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July 22, 2020
Leasing a new car requires a far smaller up-front investment than purchasing one. However, most leases still require you to put down money upfront....unless you know what you're doing.
So do zero down leases exist? Yes, they really do.
The trick is that even leases not advertised as "zero down" can become zero down with some negotiation.
This guide will breakdown how zero down leases work and how you can negotiate a new car lease to avoid putting money down up front.
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Looking for Deals? Here's our picks for the best zero down lease deals this January.
Listen to our audio to learn about the most important information when it comes to $0 down lease deals:
With a no money down lease, you skip the down payment and roll it into your monthly lease payments. In some cases you can defer all upfront costs, but fees like registration and your first month's payment may be due at signing. More on that later.
But let's start by looking at some leasing terminology.
Key Leasing Terms
- Capitalized Cost: Capitalized cost (or cap cost) is the sales price of a car being leased. It includes the car's negotiated price plus any additional costs that will be financed through the lease. The lower the cap cost, the lower your monthly payments.
- Capitalized Cost Reduction:Â This is similar to a down payment that reduces the vehicle sales price. The cap cost is reduced by any upfront cash you pay at closing plus the value of your trade-in.
- Lease Term: This is the number of months during which you will have use of the vehicle and will pay an agreed upon monthly payment.
- Residual Value:Â The residual value of the car is the amount you would pay the leasing company if you decided to buy the car at the end of the lease.
- Depreciation: The reduction in a car's value from the beginning to the end of the lease term. This is calculated as the difference between the cap cost (minus cap cost reduction) and the residual value.
- Money Factor: This is the rate at which you are borrowing money. It's the lease equivalent of the annual percentage rate (APR) when buying a car with a loan.
When leasing a car, the more you pay upfront, the lower you pay in monthly payments. The opposite holds true as well. The less you pay upfront, the more you pay in monthly payments.
By opting for a zero down lease, most or all of your upfront payment (cap cost reduction) is rolled into your monthly payments.
Keep in mind that a 0 down lease does not always mean that you can waltz in empty-handed and drive off in a new leased car. Even with a no money down lease, you sometimes still have to pay for the sales tax, dealership fees, and the first month’s payment. However, it is possible to roll the document and dealer fees into your monthly payment. More on the types of zero down leases below.
So why put zero down on a lease? This type of lease structure is appealing because...
There are also some downsides to zero down leases.
Your down payment is not the only potential cost when you sign your lease agreement. There are also:
There are big differences in what you pay upfront, so let's take a closer look.
There are four primary types of zero-down leases. These are:
Is a zero down lease the same as a one-pay lease?
No, a one-pay lease is the opposite of a zero down lease. Instead you combine all the payments and make them up front in a single payment to save on interest.
Even though dealers and manufacturers promote zero down leases, only certain customers qualify. Your credit score is the key factor determining whether or not you qualify for a $0 down lease deal. Most lenders will require you to be a "well-qualified customer", meaning you must have a high credit score, over 680. Having your credit score at hand will help you know if you qualify for a $0 down lease. Those with poor credit can also consider getting a cosigner that has a better chance of qualifying.
In other cases, you may need a sufficient debt-to-income ratio to cover the expected monthly payments. Manufacturers have different requirements for a debt-to-income ratio, but even with good credit, some may require a fairly high annual income to give you a zero down lease.
Here’s how to lease a car for no money down.
The first option is to search for advertised 0 down lease deals. Dealerships and manufacturers will usually publish zero down lease deals at the beginning of each month, so your best bet is to look around for those specials. Check out this month’s 0 down lease deals here.
The majority of car leases are advertised with a down payment, but yes, you can negotiate a lease to become zero down.
Once you find a good advertised lease deal, the trick is too simply ask the dealer if they will allow it. If you have a good credit score many will accommodate, especially since you'll be paying more interest over the lease term.
Now if the car you want doesn't have a good lease offer, negotiate the sale price first and the down payment last.
You'll get the best deal by getting prices from several dealers and then negotiating over email. Don't tell the dealer you will be leasing up front. After you agree on a good car price, ask the dealer to use that as the capitalized cost of a lease. Then ask if you can roll the down payment into your monthly payments and voila....you've got your zero down lease!
Most of the time, you must make a down payment on your leased vehicle. Zero down means that you will not have to put any down payment on the vehicle, and you can instead roll the fees into your monthly payments. This is different from "sign and drive" or "0 due at signing" specials because with zero down, you still have out-of-pocket expenses the day you sign the lease.
Negotiating a car lease may be intimidating, but it is crucial for getting the best deal. It’s best to look for new deals each month and then have multiple dealerships compete in order to get the best price.
0 due at signing means you will not have any out-of-pocket expenses on the day you sign the lease. The cash-due fees are rolled into your overall lease cost, which means you will have a higher monthly payment.
Lease terms are negotiable, and you can usually negotiate the down payment and total money down. With a solid credit score, you may be able to drive away without putting any money down.
A good, strong credit score will help you qualify for a lease with no money down. Typically, we recommend a credit score of 680 or above.
There is not a set amount that you should put down on a lease. Your personal finances and preference will play a role. Keep in mind that putting more down will help reduce your monthly payments and the amount of interest you pay, but it is a larger out-of-pocket expense that you cannot get back.
The payment amount varies by lease terms like the money factor. Â Just ask your salesman to give you lease quotes with and without a down payment so you can see the difference.
It is unlikely you’ll be able to skip the down payment if you have bad credit. In fact, if you find a leasing company that offers bad credit leases, you’ll likely be required to pay additional cash upfront.
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