Is it possible to lease a car with no cash down and no monthly payments?

Yes — in the right situation.

Let’s explain.

Most car leases require a cash down payment, including first month’s payment. They also require that you make payments each month for the term (length months) of the lease. The sum of all those payments is the total amount paid for the lease.

It is possible to pre-pay the total, in cash, to avoid monthly payments. It’s called a single-pay lease or pre-paid lease. We discuss it in our article, Single Payment Car Lease.

How it it possible, then, to avoid the single cash pre-payment — no money down, no monthly payment?

Let’s assume a $25,000 car, leased for 36 month, at 3.0% interest (.00125 money factor) and a residual percentage of 60% of MSRP ($15,000). The monthly payment for this lease (assuming no sales tax) is $327.78 (using our amazing Lease Calculator). For 36 months, the total cost for this lease is $11,800.

Now, let’s assume you have a trade-in vehicle that has a value of $11,800.  Do you see where we’re going with this?

So you apply the $11,800 trade value of your old car to the new car lease that requires a single payment of $11,800 and, voila, you have a brand new car with no down payment and no monthly payment for 3 years. In effect, you have used the equity in your old car to completely pre-pay the lease on a new car.

How do you justify this technique?

If your old car has $11,800 of value still left in, you could keep driving it for 3 more years (or more) and its value will further depreciate to, let’s say, $5000. Or if you use the $11,800 in equity to pre-pay a lease on a brand new car, you “use up” that $11,800 over the term of the 3 year lease — you have no equity at the end of most leases. So there’s a $5000 difference. Essentially, the cost of driving a brand new car with all the latest styling, technology, and safety features would cost you $5000. when compared to keeping the old car. Many people would consider this a worthwhile tradeoff.

Of course, at the end of 3 years you would return the car to the lease company (or purchase it for the residual value in the lease contract) and start all over with a new car, with a new down payment and new monthly payments.

Conclusion

Yes, there is a way to lease a brand new car with no cash and no monthly payment. It requires that you have a trade vehicle with enough equity value to pay for the total cost of the lease. Even if your trade vehicle doesn’t have quite enough to cover the entire cost of the lease, you may still require only a relatively small amount of cash to affect the single-pay lease technique and avoid monthly payments.