No money down car purchase?

October 2, 2006 10:57 AM

A friend wants to lease a car with very little, or no, money down...

She wants to minimize her current cost of owning the car, hopefully having a low lease or purchase payment and not much money down.

As an aside, we're looking at mostly new cars under $14k, and she probably wants to buy American, so that kills the cars I would reccommend. She's not too concerned about the car attributes of the car, so an Aveo or Cobalt looks like a possibility, since she can get the GM discount. And we have talked about buying used, which is also a possibility.

However, I'd like to present some other options to her, so can you tell me what car companies have available good purchase or lease rates right now such that buying an already cheap car would be easy to do without any a significant down payment? Is there a site that summarizes available finance and lease terms from different car manufacturers? Should she look into getting financing from her bank or credit union?

We're in Chicago...

posted by jcwagner to travel & transportation (8 comments total)

Ah! Bad proofreading - should say that she wants to lease OR BUY with little or no money down.
posted by jcwagner at 10:58 AM on October 2, 2006

You might want to look into something like SwapALease.com where you can take over someelses lease on a new car, and sometimes get a big chunk of cash with it.
posted by blue_beetle at 12:24 PM on October 2, 2006

Is she looking to buy new? If she has good credit, as I understand it, now is actually a good time to buy a 2006 car, as the dealers are trying to get rid of as much 2006 inventory as they can. She should look for manufacturers that are giving factory rebates, or cashback deals - those are usually applied to your downpayment. So you wind up paying very little out of pocket (if anything) as a down payment, but a sizable amount is applied to the cost, so your monthly payments are lower.

Usually the deals are low APR loans or cash-back deals, I don't think they ever do both, so it usually evens out.

Her payments will be higher if she purchases over leasing, but I have leased two cars and it wound up costing me much more money in the long run. Purchasing is the way to go if she can swing it.
posted by pazazygeek at 12:37 PM on October 2, 2006

FYI, I bought a 2006(Nissan) about a month ago, with a cash back deal that more than covered the down payment.
posted by muddgirl at 2:00 PM on October 2, 2006

Leasing doesn't make sense to me for someone on a lowish budget. It seems to work well as kind of a luxury option for people who always have to have a new car, and would otherwise "trade up" every couple of years anyway, eating the depreciation and leaving a fat commission on the table for Their Guy, the salesman who is so happy to see them return.

For others, leasing is a means to get into a more expensive vehicle than they can really afford (and they think they won't mind in 3 years when they have to simply give it back after pouring in thousands of dollars in rental fees.)

Few people can pay cash for a new car, but if you're going to make payments, at least be buying value in the vehicle, not just the privelege of driving it.

Talking to a credit union with which you have a relationship can make a purchase deal happen that might otherwise not, such as a low/no downpayment for less-than-golden credit. They'll often have the lowest available rates, too. Never take a dealer's arranged financing without consulting a credit union first.
posted by Tubes at 2:23 PM on October 2, 2006

Leasing is the most expensive way to operate a vehicle. Check with Cosumer Reports or any financial magazine and you will find this to be true. It is *very* well documented.

If you are looking for a no-money-down loan, you are buying too much car for your financial situation. There is no car nice enough to make the monthly stress of paying it worth while, or worse, facing a repo man.

Best bet is to save your money and do a 2-4-6. Buy a 2 year old car, drive it for 4 years, sell it at 6 years old. You pay no interest. You take the least hit in depreciation. And a well cared for 2yr old car is virtually indistinguishable from a current year model.
posted by kc0dxh at 2:34 PM on October 2, 2006

You definitely want to have the load through her bank or credit union, so you don't have to deal with the dealership's finance sharks. Check out bankrate.com for rates and calculators that show you what will happen with various financing scenarios.
posted by Mr. Gunn at 3:58 PM on October 2, 2006

Thanks for all the general advice about what to do in other situations, but the reality is, she wants a new car, and she doesn't have much or any money for a down payment.

I will try to convince her to buy used cars, but I don't think that it will happen. The points about buying behind the model year are very useful, though, as is the pointer to swapalease.com. Thanks for that.
posted by jcwagner at 1:53 PM on October 4, 2006