Dumb Lease Money Down Question

Sorry for the dumb question but looking to lease car after spending 10+ years in Asia for working - relocating back to the US. Understand that it is not good to put money “down” on a lease but does that include the taxes/fees/etc. that you have to pay?

Thanks!

Generally, when one says to not put any money down, it means to minimize all of your put of pocket expenses, so that includes taxes/fees/etc.

It is a bit more nuanced discussion than just “don’t ever do it” though.

While it’s isn’t a great idea to put money down for the sake of lowering the monthly payment, it’s not always a simple answer. In MD, where you pay sales tax on the full sales price of the car, it may be a good idea to pay that amount up front, especially if the money factor rate is 5 or 6%.

When you put money ‘down’ (for the principal or for taxes), and you get in an accident in year 1 (or maybe even Year 3) of your lease, all that money disappeared into the negative depreciation of the car (The car went down in value by driving it off the lot)

The upside of putting money down is your payment is lower and your total cost of ownership at the end of the lease is lower. (Slightly)

So if you put money down and you get in a bad accident, all that money is usually gone for good. If you don’t put money down and you get in an accident , most leasing companies (Not Toyota) will forgive the depreciation.

BTW You don’t have to put ANY money down or for taxes, just dealerships like to get some cash from you whenever you buy one of their cars.

The pros and cons of “money down” don’t change regardless of whether the line item for that money says cap cost reduction or taxes.

:point_up:

It can around the edges. For example, in NY, if you roll the taxes and government fees, you have to pay sales tax on those amounts + the rent charge on them (yes, sales tax on sales tax) that you wouldn’t pay if you paid them upfront. Can be a real money difference when you’re rolling the sales tax on a significant amount of rebates like we’ve been seeing on the EVs, in which case you have to weigh the added cost vs the risk of losing the money if the lease is totaled.

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Genuine (math) question: wouldn’t there be more of a “loss” of a large down payment if you have a total loss earlier in the lease than, say, in month 35 of a 36 mo lease?

Yes, it is definitely front loaded

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Of course! Year 1 is where most of the depreciation comes from.

Year 3 is more of [WTF I lost all this equity I built up!] posts, but if you lease say an EV, there is probably no equity in all years.