Trading in Your Car as a Lease Down Payment

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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 13, 2018

A down payment isn’t required with a lease, and is rarely recommended. But you can still make a down payment with a trade-in or cash, if you want. You just need to understand why a down payment won’t help you save money with a lease.

Can I Trade in My Car on a Lease?

Simply put, yes, you can trade in your car and use any or all of the equity as a down payment on a lease. Dealerships typically won’t turn away a trade-in – especially if it’s in good shape – so if you plan on trading a vehicle in, make sure you do some research. Visit used car valuation sites such as NADA Guides to see what the estimated trade-in value is, and, if needed, be prepared to negotiate with the dealer.

If you find that your vehicle’s trade-in value is relatively high and you don’t want to use all of it toward a down payment, the good news is you don’t have to. You can apply the amount you want as a down payment, and the dealer gives you a check for the remaining balance.

Down Payments with Financing vs. Leasing

What you need to know is that unlike financing, you’re essentially pre-paying the lease and not saving money by using your trade-in as a down payment. The reason why is because the lease payment is based on the car’s depreciation and a pre-computed money factor (interest rate in leasing). Therefore, a down payment on a lease only reduces that by the amount you pre-pay. Basically, a lease down payment lowers the amount of your monthly payment, but doesn't reduce the overall cost.

When financing, you put money down in order to reduce the amount you need to finance and decrease interest charges. Making a down payment allows you to save money in the long run since interest is computed based on the balance owed.

The Bottom Line

Leasing isn’t for everyone, and you may not qualify for one depending on your credit situation. Our experts look into the best lease deals each month, but if you’re worried you won’t qualify for a lease, know that there may be financing options available.

At CarsDirect, we can help you get matched with a dealership near you that specializes in working through challenging credit situations. Our service is free of cost and obligation, so you can get started by filling out our auto loan request form today.

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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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