You don’t get your down payment back on a vehicle lease, and the only time car lease down payments are refundable is if you back out of the process and don’t sign the paperwork.
What Happens to the Down Payment on a Leased Car?
Because the interest rate is built into the lease payment, making any type of down payment isn’t going to lower the overall cost of the lease. Instead, a down payment reduces the capitalized cost. The "cap cost" includes the vehicle’s selling price, any inception fees, and title and license fees if not paid up front. Depreciation, any additional miles, the interest rate (called the money factor in leasing), and taxes are what make up your monthly payment.
The simple explanation is that a down payment simply pre-pays the depreciation, interest charges, and taxes on a leased car. Even though you don’t save on the total cost, a down payment can help cover additional fees such as a security deposit or an acquisition fee (also called a bank fee), which is an amount charged to set up the lease by the leasing company and is added to the cap cost.
Car Lease Down Payment: Crunching the Numbers
A down payment is recommended for an auto loan because it can help you save on interest charges, lower your monthly payment, and save on the overall cost. With a lease, however, interest is included in the calculations and a down payment isn’t required. If you’re curious about how a down payment affects your lease, check out this example:
Let’s say you’re looking into leasing a 2018 Ford Focus S Sedan, and are wondering if you should make a down payment. Using the average lease length of 36 months, 12,000 miles a year, and six percent sales tax, here’s what your lease might look like based on different down payment amounts using Ford’s estimated lease payment tool:
|Vehicle Price (estimated net price)||Down Payment||Monthly Payment|
|$18,575||0% – $0||$313|
|$18,575||10% – $1,800||$263|
|$18,575||15% – $2,800||$235|
|$18,575||20% – $3,700||$210|
Making a sizeable down payment is a great way to lower your monthly payment and make it easier to manage. But, remember, even though it may feel like you’re saving money by putting money down, making a down payment simply pre-pays the lease by reducing the cap cost. If you don’t plan on putting any cash down but have a trade-in with equity, you could use it as a down payment.
The Bottom Line
If you think leasing is right for you, you can start researching cars right here. But if you don’t think your credit stands up to the qualifications of leasing, don’t give up hope. At Auto Credit Express, we know it can be tough to get the vehicle you need when you’re struggling through credit issues.
We work with a nationwide network of special finance dealerships that have lenders available to work with people in many credit situations. Don’t hesitate any longer. Get the process of getting matched to a local dealer started today by filling out our car loan request form.