First Time Buyer - Lease & Downpayment
08-06-2002, 08:28 AM
#1
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First Time Buyer - Lease & Downpayment
OK Everyone, please help, about to finalize the lease of my C230K and want some last minute opinions.
Downpayments are considered bad on a lease, why are they bad? Here's some of the things I've found out:
1. You can invest the downpayment yourself and make money on your money instead of using it as a downpayment. In reality, if I am paying 7-8% interest on a lease, even a $10K downpayment would only make 2-3% in a bank, 3-4% in a GIC, 5-10% in a mutual fund (over a long time!), or you can win/lose on the stock market.
Without going to the stock market, it'd be a wiser choice to pay down as much of the "leased value" upfront to avoid interest charges???
2. Any downpayment is like pre-paying part of your montly lease, aka "rent", payments.
Your downpayment goes towards reducing the current value of the car. If the car was stolen, written-off, the insurance pays the book value of the car, and gap protection pays the difference.
Thus if the car was a total loss during the lease you have pre-paid parts of lease payments you'll never make... what happens to that money?
For instance, a 4 year lease with $8K down. After 2 years the car is totalled, realistically you've only used up $4K of the original downpayment, what happens to the other $4K?
I am forced to leave a $8K deposit due to my lack of credit history inorder to lease a C230K. I would like to know as much as possible before the day I sign the lease about what may happen to that $8K.
Downpayments are considered bad on a lease, why are they bad? Here's some of the things I've found out:
1. You can invest the downpayment yourself and make money on your money instead of using it as a downpayment. In reality, if I am paying 7-8% interest on a lease, even a $10K downpayment would only make 2-3% in a bank, 3-4% in a GIC, 5-10% in a mutual fund (over a long time!), or you can win/lose on the stock market.
Without going to the stock market, it'd be a wiser choice to pay down as much of the "leased value" upfront to avoid interest charges???
2. Any downpayment is like pre-paying part of your montly lease, aka "rent", payments.
Your downpayment goes towards reducing the current value of the car. If the car was stolen, written-off, the insurance pays the book value of the car, and gap protection pays the difference.
Thus if the car was a total loss during the lease you have pre-paid parts of lease payments you'll never make... what happens to that money?
For instance, a 4 year lease with $8K down. After 2 years the car is totalled, realistically you've only used up $4K of the original downpayment, what happens to the other $4K?
I am forced to leave a $8K deposit due to my lack of credit history inorder to lease a C230K. I would like to know as much as possible before the day I sign the lease about what may happen to that $8K.
