Is it Worth Making a Down Payment on a Car Lease?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - September 26, 2019

If you’re considering leasing your next car, and wonder if it’s worth making a down payment, the answer is typically no. In leasing, you don’t make a down payment, rather, you make a capitalized (cap) cost reduction. Cap cost reductions aren’t typically required, but if you have a trade-in or want a lower monthly payment, you certainly can put money down.

Why Don’t You Save Money with a Down Payment on a Lease?

While you lower your monthly payment by putting money down, you don’t end up saving any money overall on the lease. The reason why? The total cost of the lease is set ahead of time.

When you finance a vehicle, you’re signing a simple interest auto loan. A down payment reduces the amount borrowed. When you borrow less, your interest charges drop and you end up paying less in the long run.

When you lease, the interest charges are built into the monthly payment and included in the capitalized cost. The cap cost includes the car’s price, title fees, license fees, and inception fees – if they're not paid for up front.

So, a monthly lease payment includes the vehicle’s depreciation, the interest charges, taxes, and any extra miles you purchase. This means that when you make a down payment on a lease, you’re just pre-paying it and not saving any money when all is said and done, even though the monthly payment drops.

Hidden Lease Fees to Watch Out For

Down payments aren’t usually needed or required with leasing, but that doesn’t mean you’re off the hook and can drive off with your leased car. Just like buying a vehicle, there are additional fees associated with leasing. If you aren’t prepared for them ahead of time, you could find yourself in a financial bind and may not be able to afford the lease payment.

Depending on the lessor, you may not be required to make some of these extra fees, but it doesn’t hurt to know what they are:

  • Documentation, title, and license fees – The state title and licensing fees are the same as if you were buying a car, documentation fees vary by dealership.
  • Disposition fee – Also called a termination fee, this fee accounts for the leasing company's overhead to transport and sell a vehicle at lease end. You may be able to avoid it if you buy the car at lease end, or lease another vehicle.
  • Security deposit – Security deposits are due at signing, but aren’t always required. The amount is typically the same as the monthly payment, and as long as you keep the car in good shape, you get the security deposit back at the end of the lease.
  • Acquisition fee – This is charged by the leasing company to prepare the contract. This is usually included in the capitalized cost, which makes it a part of the monthly payment.

You should also expect to make the first monthly payment up front, so be sure you have the money on hand.

The Bottom Line

Down payments aren’t generally required for auto leases, but you can make one if you want to lower the monthly payment. Just be aware of how a cap cost reduction works on a lease.

If you’re on the fence about leasing with bad credit, and are considering financing as an option, CarsDirect wants to help. Our service matches consumers to local dealers that specialize in handling unique credit situations.

Fill out our free and easy car loan request form, and we’ll get right to work connecting you to a dealership in your area.


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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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