NEW YORK (MainStreet) It's as counterintuitive as personal finance gets, admitted Justin Sisley, who runs theautoleaseguy.com. But the more money you put down on a car lease, the bigger sucker you are.
That's exactly contrary to buying a car where pretty much every advisor nowadays suggests going big on the down, to get the monthly note payment lower and also because, frankly, returns on cash are so anemic, it may be wiser to reduce interest payments.
That logic falls flat on its face with car leases, however. There's even a killer argument that shuts the door on putting down extra money on a lease.
For starters, understand that leasing a car is fundamentally different from buying. In the latter you are in fact acquiring a tangible asset, a car.
With a lease, you are paying as you go for use of a car. Big difference. Said Jason Lancaster of AccurateAutoAdvice.com: "You're not buying a car, so you're not locking yourself into years of payments and/or a giant capital cost."
He added: "The main benefits of vehicle leasing are mostly a) conserving capital and b) maximizing cash flow."
Put down a lot of cash, and you just vaporized those benefits.
Jordan Perch, an analyst at DMV.com, said similar: "Considering that one of the main goals of leasing a car is spending as little cash as possible, putting a lot of money on a down payment is not recommended. Generally speaking, it's better to make the payment that was determined by the dealer, without exceeding that amount."
Do the math and, in most cases, a lease lets a driver get into a more luxe car with less money involved. Yes, with a lease no equity is built up. But also with a lease you only pay for what you use, as you go.