When you are looking for a perfect deal on a car lease, there is probably nothing that catches your attention quicker than the statement „$0 down“. Did you perhaps wonder what is the zero-down offer and what does it require? A zero-down lease is a legitimate deal offered by lots of companies For leases which qualify for this, it makes it easier to finance a lease. To understand „zero-down“ leases better, you will have to understand how the payments work.
What is paid in a lease?
Negotiating a car lease can be complicated and time-consuming, especially if you do not understand the terminology and calculations that will determine that you are going to pay for. This makes it easier for customers to get confused and taken advantage of when negotiating. As someone who is looking for a car loan, you will need to know what you are getting into. The total cost of the lease (what your down and monthly payments will cover), is known as the capitalized cost or cap cost. This includes:
- Depreciation – the number of monthly payments is covering the value of the car or its loss of value over some time. This is founded on the residual value of the car, the prediction of the worth at the end of the lease period.
- Fees – these include bank fees, DMV fees, and documentation fees. These will be a big factor when it comes to your bills.
- Interest – the interest rate, often referred to as the money factor, is based on your credit score. The amount will vary between companies.
- Taxes – in most states, you will need to pay taxes only when you make your monthly payment. This makes leasing more affordable than buying.
- Down payment – some lease contracts will ask for an amount of money upfront, which is the down payment. This payment goes to what you will have to pay every month during the contract.
What does „zero-down“ mean?
A zero-down lease means that there is no down payment. Keep in mind that this does not mean that you can show up without any money. You will still have to pay for something, such as the taxes, fees, and possibly the first monthly payment. Zero-down lease deals have a few different forms. You might have to pay fees and the first monthly payment upfront, or just the fees. Sometimes, even the fees can be included in your monthly payments.
The benefits of a zero-down lease
To begin with, you will have to pay less upfront. This could mean the world to you since you will not have to borrow or save money to start your lease. This is one of the main reasons why zero-down leases appeal to a lot of people. You will also pay the taxes at a slower rate. During each of your monthly payments, you will be taxed a small amount of money, instead of adding a bigger tax payment to your upfront payment. And finally, you are less at risk in case of a car accident, since the leasing company holds the title of the car. Any insurance payments will go to them if you have an accident or if your car gets stolen.
The sound of the title „zero-down“, is quite hard to ignore. What is good is that these kind of offers are out there and they can give a lot of advantages when signing a lease.