QuestionQUESTION: I've read that when leaing a new car from the dealer, you should avoid 'cap cost reduction' and not put any money down whenever possible. It said you are making a down payment on property that isn't yours, and if the car were totaled that money down would be out the window. I also understand that if you put a lot down to get lower payments, it's about the same in the long run as putting nothing down and making higher payments. It would be a gamble, but what if the car is never totaled and someone can easily put down a lot more ($5k or more) and they really want a lower monthly obligation... is it still inadvisable to do that? Thanks
ANSWER: Hi Lee,
The simple answer to your specific question: is it advisable to put money down if the goal is a lower monthly payment.
Look at the total downpayment that you are considering, and add it to the total of monthly payments that you will be making during your contract. If that number is the same or less than what you would spend otherwise you may want to go that route.
If a lower monthly payment is the goal, ask yourself whether or not that specific goal is more important than the over all savings. If the answer is yes, than money down is the route you should take.
Also look at a "one Pay" lease. Pay all of your payments up front with zero monthly payment. There is a savings there as well.
Cheryl Bowman
www.themercedeslady.com
---------- FOLLOW-UP ----------
QUESTION: RE: if the car is totaled during that period, is it correct that I would be out the full down payment? Should that be a major factor in deciding how much to put down or not to put down? Thanks
AnswerIf the car is totaled during the lease you will be able to walk away from the contract. Yes Lee, it is true that you will leave your down payment and monthly lease payments on the table. The same as you would in a finance or cash deal.
To answer your question; The amount that you put toward your purchase should not have any correlation with weather or not the vehicle is a total loss.
