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Why It's Not Smart to Put a Down Payment on a Lease

Down PaymentMany consumers assume that down payments are required on car leases - this is not true at all.

In fact, we advise against ANY down payment when you lease. There are several reasons for this, the most important being that you can lose the money you put down if your vehicle is stolen or totaled, especially during the first few months of your lease.

Insurance companies pay the actual market value of a vehicle in the event that it's stolen or totaled.

Even if you have GAP insurance, your down payment is still not fully protected.

Imagine putting $3,000 down on a car you don't own, it gets stolen and you lose that amount! That's a huge hit, and it's not as uncommon as you think.

Another reason to avoid putting any money down is because in most states, you will need to pay taxes on that amount. (If you roll it into the monthly payment, you'll still pay taxes, but it will be paid off slowly over the life of the lease).

One of the main advantages of a lease is supposed to be low up-front costs and low monthly payments which frees up your cash flow. If you have to put up several thousand dollars in the beginning, it defeats the purpose.

Always remember that leases are negotiable - it's simple to roll any down payment into the monthly lease payment, and you should always do so.

My Recommendation for Car Shoppers

TrueCar No-Haggle and Edmunds Price Promise are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan

Gregg Fidan

About: Gregg Fidan

Gregg Fidan + is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.

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