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Originally Posted by Hawkshaw
From Edmunds.com:
Down Payment for Leasing
The strategy for leasing a car is the opposite of buying — no down payment is recommended (in leasing, the down payment is called a "cap cost reduction"). Often, consumers put down as much as $3,000 to lower their monthly payment. While it's true that the monthly payment is reduced, consider this: If the buyer gets into a serious accident in the first few months of his or her lease contract, and the car is totaled, the down payment is completely lost. Even with collision and gap insurance, no portion of the $3,000 down payment is ever refunded.
So, when leasing a car, take the $3,000 you wanted to put down on the car and open a separate bank account. Make higher payments out of this account rather than putting the money down on the car. You can go one step further and roll the "drive-off costs," which would normally be paid upfront, into your monthly lease payment. Drive-off fees are the related fees required to drive your car off the lot: security deposit, acquisition fee, etc. You drive off the lot with no money tied up in your car and all of it in your pocket (or bank account). After all, the appeal of leasing is to maximize your cash flow. How can you do that with your money tied up in a large down payment?
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See the loss of the down payment doesn't make any sense as in the event of an total loss insurance claim (maybe different in the US) they go by the fair market value of the car vs. payoff amount on the lease. I know someone who had a full claim on a leased car recently and that was basically how it worked.
So in my case the balance owing on the lease is the residual ($24K)... I would get back from the insurance co. the difference between this amount and the fair market value in the event of a total loss. I actually have new replacement (gap?) insurance which means that supposedly they replace the totalled car with a new one on the same contract. So I don't pay anything or get money back but I can buy the car for the residual which would obviously be a good deal since the car would be much newer.