Leasing a Car: Should I Make a Down Payment?

There are many advantages to leasing a new vehicle vs. buying it. Among these are lower monthly payments, lower licensing fees, and the chance to pick out and drive a brand new vehicle every 3-4 years, depending on the length of your lease.

When making the decision to lease, many consumers are surprised to find that the low monthly payments are only made possible by a large down payment—sometimes as much as $5,000. Though many dealerships will insist this is the only way to achieve the lower payments, it’s important for the consumer to know that all leases are negotiable. We advise never to put a large down payment on a leased vehicle for the following reasons:

You Can Lose All the Money

You must fully insure any leased vehicle, but that insurance only covers the value of the car—not your down payment. If you get into an accident and your new vehicle is totaled, or if it is stolen, you will lose all the money you’ve put down. If this happens early on in the lease, you won’t even have time to realize the monthly savings that came from the large down payment.

Some consumers who lease a vehicle make the decision to get out of the agreement before their lease time is up. This may be because they realize they are going over mileage, because the vehicle doesn’t work for them any longer, or due to other unforeseen circumstances. Getting out of a lease can be a big hassle, and that hassle is made even bigger if you know you’ll lose the thousands of dollars you initially put down on the vehicle. It’s better to pay a bit more each month and eliminate the risk.

You’ll Pay More in Taxes

In most states, you will have to pay taxes on any money you put down for a leased vehicle. Because one of the reasons many people lease is to save on taxes, a large down payment negates one of the major advantages to leasing. Paying larger monthly amounts will allow you to budget for the taxes as you pay them off slowly over the life of the lease.

Most people who decide to lease do so because it saves them money and allows them to drive a brand new vehicle they otherwise could not afford. However, it’s important for them to know that they have options when it comes to the terms of the lease. If the dealership insists on a large down payment and seems unwilling to negotiate on the point, it’s often best to go to a different dealership. The decision on whether or not to put down a large payment should always be up to you.

If you would like more money-saving tips or have financial questions, please feel free to visit the Preziosi Nicholson website for more information.