The no money down lease isn’t a privilege it’s a common sense practice for leasing cars. Though car manufacturers and dealers might have you believe differently, the no money down car lease is a common sense car leasing practice. If the idea behind a car lease is to save cash, then why put a chunk of that cash down before you even drive your first mile? Car leasing is all about cash flow and preserving capital to afford your monthly bills, including those expensive car payments. So, if a lease with no down payment is the way to go, then why do car dealers and car makers almost always require down payments on their advertised car lease deals?
A No Money Down Lease Means Higher Car Payment
Down payments are a sales too used by car makers and dealers to make you believe you are getting a lower monthly payment. The reality is, the down payment you make on a lease reduces the total cost of your your payments by very little. The interest portion of a lease is based on a very small money factor (low interest rate). The interest cost is typically only about 19% of your monthly payment. Unlike a 36-month, 48-month or 60-month car loan, a down payment on a lease saves you very little on the total cost of interest. The most expensive part of your payment is for depreciation of the car, so a $2,000 or $3,000 down payment on a lease will save you $5 – $15 a month of interest at the most. On some of the best car lease deals, the interest rate is practically zero which means a down payment is no better than putting a bunch of money up front for no good reason. The psychology behind down payments looks much better. For example, putting $3,000 on a 0% interest, 36-month lease will lower your payment by about $83.00. The dealer or car maker can advertise a $299.00 a month payment with $3,000 down, because it looks much more affordable than the $382.00 payment without the down payment. For you, does it make sense? Think of it this way. You’ll have to make 36 of those $299 a month payments to recoup your $3,000 down payment. That’s 3 years. Let’s remember why we lease cars? To save money. Let’s keep our cash and make the slightly higher payment, knowing that it will not significantly reduce our cost of ownership throughout the lease term. While this financial advice may sound good on paper, let’s put it into practice with an actual example, using Honda’s no money down lease offer.
Honda No Money Down Lease Offer
Whoah! I had to look at this lease deal from Honda three times just to make sure I was doing the math correctly. Make no mistake about it: You will save $503 over the 36 month lease term by going with the no money down lease instead of the $1999 down payment. I cannot think of too many people anxious to give away $503 for no reason. Not all no money down lease offers are going to be this attractive, but it does illustrate the point: You can’t save your hard earned money by putting a chunk of it down on a car lease. The no money down lease is the only way to go.