Whether you're talking about leasing or financing a car, a down payment isn't refundable. You don’t get your down payment back on a vehicle lease. In leasing, a down payment is referred to as a cap cost reduction, and it lowers the amount of your loan by reducing the capitalized cost and the amount being financed. The only time car lease down payments are refundable is if you back out of the process and don’t sign the paperwork.

And, a down payment isn't always necessary or wise when leasing, so let's take a closer look.

Where Does the Down Payment on a Lease Go?

Do You Get Your Down Payment Back on a Car Lease?

Because the interest rate is built into the lease payment, making any down payment isn’t going to lower the overall cost of the lease. Instead, a down payment reduces the capitalized cost and is called a cap cost reduction. Making this payment is optional since down payments aren't typically required on a leased vehicle.

Because a cap cost reduction is essentially a pre-payment of your lease, we don’t recommend doing this. The reason for this is that if something were to happen to the vehicle after only a few weeks or months, you wouldn’t get the down payment back

The "cap cost" includes the vehicle’s selling price, any inception fees, and title and license fees if not paid upfront. Depreciation, any additional miles, the interest rate (called the money factor in leasing), and taxes are what make up your monthly payment.

In a way, if you've made a down payment, you've paid more than needed for a car you no longer have if something happens soon after you get the car. You also won’t be reimbursed for the value of the vehicle – the insurance settlement goes to the leasing company. In other words, you're out a car and any money you’ve already paid.

When leasing, you're required to pay certain charges at signing. These charges typically include any inception fee, the title and registration fee, and the first month's payment, which shouldn't be confused with a down payment. These charges, including a down payment, aren’t refundable, although a security deposit may be if one is required.

A security deposit is an additional charge that's generally held by the leasing company to cover repairs needed from excess wear and tear when a vehicle is turned in at lease end.

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 2024 Ford Escape SUV, 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
$29,495 0% – $0 $532
$29,495 10% – $2,950 $442
$29,495 15% – $4,424 $399
$29,495 20% – $5,899 $354

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 with credit issues.

Now that you why a down payment doesn’t make sense in leasing, it's time to determine if leasing is right for you. Though it can be a great way to get a new vehicle with an affordable monthly payment, it's typically easiest to lease when you have stellar credit. Consumers with low credit scores hoping to lease may find themselves out of luck.

Purchasing a vehicle is typically the easiest route to go if you're struggling with credit issues, and you can start your search for a dealership to work with right here.