Most people here prefer no down-payment, and most of us know the benefit of that when it comes to leasing.
But reading through some posts there are a good amount that prefer to put some money down just to have lower payments.
What is the benefit of having a lower payment? Effectively you are paying the same by the time the lease is up. I am guessing it would help credit score. Is there more ways it can help? From a lender perspective, you either have $5-$10k in the bank or a lower payment, so wouldn’t those negate each other?
I am just curious for the want to have lower payments by putting money down.
Many people have a psychological anchor to a payment number, and feel like up-fronts (which can be lost, or wasted in an early exit) get them to a comfortable payment number. You spend the money regardless.
Some people will pay upfronts or one-pay to pay the absolute lowest rent charge possible, or to avoid rolling-in upfronts so they aren’t taxed.
I’ve shared the math around this a couple times:
It’s all preference. I am a “max MSD” (since I learned they exist) and sign-and-drive” - minimize the rent and transfer all the risk.
I paid a bit more in drive offs than I normally do on my e-tron because the dealer wasn’t being receptive to capitalizing fees and my wife wanted to make sure the payment wasn’t more than the old car because now that she’s not working, the monthly payment being higher makes her feel more anxious. The minimal risk wasn’t worth pushing back against an issue she recognizes isn’t rational.
I’ve helped some younger folks get leases with some DP assistance from family in the shape of cash as a graduation present, wedding gift, etc.
I believed it was more financially responsible to use that money, say, $2,000 as DAS rather than leave it in the bank towards higher payments, because the urge to splurge for perhaps the first time in your life is pretty strong.
Relatively small DAS amounts like that are fine IMO because the risk is low, there’s a clear reason for it, and you’re not using it for mental gymnastics like “tell me how much I need to put down so I can tell myself/my spouse my new Sub is less than $500/month… is it $10,000 or more?”
I’m all for making decisions on a case-by-case basis rather than dogmatic rules
Yes. The way msds are done is they round up, so a $499 monthly is $500 per deposit, but a $501 monthly is $550 per deposit (or $525, depending on brand).
The mf reduction doesn’t change.
So if you can make a minimal cap cost reduction to bump you down below a rounding threshold, you can improve your total cashflow.
I do one pay in Texas because it usually reduces most all of your taxes and gets you a lower mf. Are there other situations where one pay makes sense as well?
In my opinion where the one pay reduction to the money factor provides enough savings to show an attractive ROI, the OP is viable.
I’m going off of memory, but as an example I think the last one pay I did had a simple return of around 6 or 7% versus that same car going monthly. If one is using money that is sitting in a money market (earning some pitiful 0.5%) for the OP, this certainly can make sense to consider. Plus, if you can put at least a part of it on a credit card, even better for the points
It only complicates transfers, which is only an option with some brands anyway. If we are talking about bmws, then I can totally get behind the argument that the mediocre return from the msds mixed with the challenge in transferring could be an issue.
