Car leasing is an easy way to own a new vehicle without being bogged down in equity. From 2012 to 2017, the portion of new cars being leased instead of purchased rose above 25%. If more than one in four car buyers is choosing to lease over finance, the proof is in the pudding. But is it possible to get a lease with 0 down payment?
For many car buyers, the sticking point is when a down payment is required. Whether it’s advertised as $3,995 down, $2,995 down, or $1,000 cash down payment, it presents a problem. It’s less common than ever for car shoppers to have thousands of dollars saved up to use as money down on a lease, so naturally they choose to finance with no money down instead.
But the question that begs to be answered is this: Are zero down lease deals available too?
Just like financing a new car with no down payment, zero down lease deals are possible. Although the norm is for car makers to advertise leases with a footnote that shows a down payment amount, those same vehicles are often available as a 0 down payment lease.
With all leases, you’re making payments on the difference between the purchase price and a predetermined residual value. At the end of your term, you have the option to buy out your lease for the residual value or turn it in.
Stay with us here. If a car ad says you need to put $2,000 down on a lease but you choose a zero down lease instead, it does not mean you saved $2,000. The amount of money you avoided as a down payment is financed instead. Regardless if you make a down payment or not, the total amount you’re making payments on remains the same. Essentially, you finance it instead of paying it up front.
Whether a zero down lease is right for you or not depends on your situation. And like all deals, there are advantages and disadvantages to consider.
The most obvious advantage is that you don’t need to scrape together thousands of dollars as a down payment. BMO reports that a third of Canadians have less than $10,000 saved up and less than a quarter are saving toward a car purchase. Depleting your savings account can leave you in a lurch if you have a sudden expense, so it can be good to avoid making a down payment.
And if you write off your vehicle in an accident, even if you have GAP insurance, you could lose your down payment. Unless you purchase New Vehicle Protection coverage from your insurer, you could be left holding the bag if your vehicle is stolen or written off in the middle of your lease.
If you do have money in your account, you can use it to pay down other high-interest debts or invest it instead. Because most leases have aggressive subvented rates from the manufacturer, you can put your money to work in other ways without worrying about high interest lease costs.
Without putting a fistful of cash down for the vehicle you want to lease, it can be hard to get approved. Lenders view a down payment as a commitment you’re making – if you put money down, you’re less likely to default on the lease, have your car repossessed, and lose your down payment. You’ll need to have good credit history to prove yourself worthy of a no down payment car lease.
Without a down payment, your payments will naturally be higher. If the difference between the selling price and the residual is $10,000 and you’ve foregone a $2,000 down payment, your payments will need to make up the difference. That may stretch your debt-to-service ratio enough to disqualify you from a zero-down lease.
Overall, you need to have a good credit score to lease a vehicle. One of the major credit bureaus, Experian, explains that auto leasing companies look for credit scores of 700 or higher to qualify for a lease.
It can be challenging to lease a car with bad credit and no money down. For a zero-down lease, you should have a bare minimum of a ‘Good’ credit rating according to the FICO scale, but that might not be enough. To qualify for a zero down lease, you may need a ‘Very Good’ FICO score of 740 to 799 while an ‘Excellent’ score of 800 or higher is almost a sure thing.
Are you unsure if your credit is up to snuff? You can check your credit score for FREE at Borrowell. Here are a few tips to give you the best chance of an approval.
$0 down lease specials are available from virtually every manufacturer – sometimes you just need to ask. But if you’re looking for the cheapest car to lease with no money down, here are a few suggestions.
Since no money down car leases are available from most manufacturers, it should make finding the right dealership easy… right? Unfortunately, it doesn’t help you narrow down your options, and you’ll need to put in hours of research to find the right choice for you.
To streamline your purchasing experience, why not let Canada Drives do the legwork for you? Whether you’re looking to purchase or lease a new car, Canada Drives will sift through the data so you can shop focused. You’ll be paired with a local dealer that has the right lease options you demand and the exact vehicle you want!
Your online application takes only 3 minutes to complete and we only ask for information we actually need.
Or feel free to call us at 1-888-865-6402