What Do I Need Up Front to Lease a Car?

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Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


, Contributing Writer - September 9, 2020

Before you start dumping your hard-earned money into a lease, it’s worth it to take a second and ask the dealer some questions about what you’re likely to need at the start.

What Fees Do I Need to Pay Up Front?

Whether or not you need money down for a lease could depend on your credit score, but even if you have good credit, you’re likely to need some cash up front.

Expect to need to pay these costs at the beginning when you lease a car:

  • First monthly payment
  • Security deposit
  • Licensing and registration fees
  • Destination charges
  • Taxes (depending on your state)
  • Processing or documentation fee (doc fee)

It’s usually not cheap to start a lease, or an auto loan for that matter! A lot of the time, these fees can simply be rolled into the total cost of your lease. Or, you can pay them up front. If you want a lower monthly payment, paying for the majority of your startup fees is going to result in a lower monthly payment.

Details on Leasing Fees

Sometimes, you’re required to pay a security deposit on a lease. The security deposit is there to cover any possible damages that happen while you’re leasing the vehicle. If you don’t cause any major damage and return the car in good condition that’s within the normal amount of “wear and tear,” your security deposit is likely refundable.

A good rule of thumb is to expect to need a security deposit that’s around your estimated monthly lease payment, often rounded up to the nearest $50 (for example, if the lease payment is $310, the security deposit could be $350). However, the amount you need to put down could vary greatly.

You may not be required to have a down payment – with a leased vehicle it’s called a capitalized cost reduction. When you put cash down on a lease, you’re not actually saving yourself any money during the lease term. This is because the entire cost of your lease is predetermined. However, if you want a lower monthly payment, a cap cost reduction could help you achieve just that.

Aside from Cash Up Front …

Besides having some cash to pay for the essential fees up front, you‘re likely to need a good credit score and enough available income to qualify for a new car lease. Those with lower credit scores are often turned away by leasing companies, since they tend to have higher credit score requirements.

First-time borrowers, or those with damage on their credit reports, usually struggle to get into a lease. Those with no credit usually have lower credit scores because they haven’t yet proven they can handle borrowing credit. Borrowers with past repossessions or bankruptcies typically are hard-pressed to find a leasing company that can approve them. Not impossible, just typically difficult. Borrowers with lower credit scores or negative marks on their credit reports typically have a higher chance of getting approved for an auto loan.

If you do get approved for a lease with a lower credit score, you may end up paying more for the lease than a good credit borrower. When you lease, you must pay money factor fees, which is just an interest rate for a lease. Those with higher credit scores usually qualify for lower money factors. These are added to your lease monthly payments, so a lower credit score can mean a higher money payment.

Bad credit borrowers who lease are also usually required to pay a security deposit, or possibly have money to put down. It all depends on the leasing company. But, generally speaking, the better your credit score, the less you pay for a leased vehicle.

Bad Credit Borrowers

Those with lower credit scores are more likely to qualify for a higher money factor on a lease, and, overall, more likely to get approved for a car loan over a lease.

If you’re considering an auto loan but you have bad credit, start right here with us at CarsDirect. We’re connected to dealerships all over the country that have bad credit lending options. To get matched to a dealer that can work with unique credit situations, fill out our free car loan request form now!

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, Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


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