14 Apr Leasing a car with no down payment

Q. If my credit score is 840 shouldn’t I be able to lease a car with no money down?
— Shopping around

A. Congratulations on having a near perfect credit score.

You should absolutely be able to lease a car with no money down, but you’re going to have to shop around.

“There are many auto brands that lease cars with no money down,” said Gerry Papetti, a certified financial planner and certified public accountant with U.S. Financial Services in Fairfield. “Note that there usually is an out-of-pocket cost that includes the registration and license plates and sometimes there may be a security deposit required.”

Papetti said your credit score plays a key role in the terms of the lease you’ll be able to get.

“The better your credit, the better the internal lease finance rates you will receive unless there is a special dealer promotion where the dealer/manufacturer is subsidizing the lease,” he said.

In general, FICO credit scores fall into the following ranges:

800 + = Exceptional
740 to 799 = Very good
670 to 739 = Good
580 to 669 = Fair
579 and lower = Poor

Papetti said auto dealers have indicated that anything over 760 usually places you in the top category for lenders, and this is how you’ll get the best lease offers.

He said when he advises clients who are shopping for a car, he recommends they approach the dealership salesperson as if they wanted to purchase the car.

“When you arrive at the best final price, then ask for their best lease program,” Papetti said. “This allows you to determine how attractive the lease is when compared to a purchase.”

Unlike a purchase, there are many factors that should be considered when leasing a car, Papetti said. These include:

1. Lease term in months
2. Annual mile limitation, i.e 10,000 miles per year
3. Cost per mile for excess miles
4. Residual value of the car at the end of the lease term in the event you wanted to purchase the car.
5. Lease termination fee, which is usually charged if you do not re-lease a car from that dealer.
6. Excess wear charges: dents and scratches larger than a predetermined size as well as tire wear can add to the cost of terminating a lease.
7. Sales tax is spread out over the lease term rather than charged on the car purchase price if you buy the car.

Papetti said the terms of leasing a car, unlike buying a car with an auto loan, are largely controlled by the manufacturer in today’s leasing market.

“That means you may be able to get a better deal if you are flexible and willing to consider a vehicle from a different manufacturer,” Papetti said. “In any event, you will be able to lease a vehicle with no money down at the best rates with a credit score of 840.”

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This post was initially published in April 2017.