Hello Lease Hackrs,
For those of you who are new to leases please make sure you are familiar with the differences between these three terms. Dealerships use the down payment loosely because they know most clients hear that and assume that is what they are paying out of pocket. Dealerships and brokers are notorious for advertising $0 down with a very attractive low monthly payment and not mention what the drive offs entail. They will usually have in fine print that state you must QUALIFY for a rebate, have a low mileage lease, and the offer is on a car that either is never in stock or a car nobody wants. (Usually a base stripped down model) So what is the difference between down payment and drive offs?
Here is an good analogy. When you finance a $100k home. You put a down payment (cap reduction) $30k to get the amount financed to $70k, which in term gives you a monthly payment of the $70k financed. However there are always escrow fees involved (drive offs on a lease) that you pay separately. Let’s say your share of the escrow fees are $2k which means your TOTAL DUE AT SIGNING is $32k to get to the financed amount of $70k.
To make things easy when shopping for a lease just ask for TOTAL DUE AT SIGNING or TOTAL OUT OF POCKET and what the monthly payment will be. This makes it very clear that you only paying that amount when you arrive and nothing more. This puts every dealership or broker at an even playing field and their monthly payment will reflect that. MAKE THEM QUOTE you total due at signing. The moment you see the term down payment make sure to correct them!
DEALERSHIPS CANNOT MARK UP DRIVE OFFS so don’t stress too much on the exact breakdown. Here is a good rule of thumb. 5% of the msrp should be your total due at signing and it will cover the drive offs and have a little left over as cap reduction. Hope this helps!