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My financial circumstances have recently changed, and as a result my cash flow is slightly negative. I have a car lease but I also have enough saved that I could prepay the remaining payments on the lease and this would bring my cash flow positive again.

At the same time, I know that just naively doing so would result in no actual savings for me. I would like to save by not paying interest on the depreciation on the already existing lease, but I am not sure if such an option exists or if it does if it has extra fees that would eat substantially into the savings.

I have read that there is something called a "single payment lease" but from reading about it, it sounds like something you have to get up front. It also mentions that there is a risk of loss if the car is totaled or stolen because "insurance would pay only the current market value of the vehicle, not the total amount you have invested in your lease". However, I do not understand this statement because I have always seen this option on my car insurance where for a slightly higher premium in the case of total loss they would pay out for more than just the "current market value" of the vehicle.

Can I switch my car lease to prepaid or is one of these factors going to bite me if I try to do so?

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    Are you able to return the vehicle early and get into more affordable transportation? Or are the prohibitive penalties for doing so?
    – yoozer8
    Commented Apr 6, 2022 at 15:17
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    Where in the world are you? Local laws (and norms for leases) may affect the answers. Please edit your question to include appropriate country/province/state tag(s)
    – yoozer8
    Commented Apr 6, 2022 at 16:20
  • @yoozer8 it's early enough in the lease that the charges would be prohibitive
    – Andy
    Commented Apr 7, 2022 at 0:43

1 Answer 1

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You may want to read over this page and see that most times, the dealership will choose the option that is most profitable for them. Leasing, is after all, the most expensive way to drive a car. Initiating another lease will probably cost you more than just paying this over time; and, if you opt for a single payment lease it will cost you even more.

Having negative cash flow, when it makes business sense, is not overly concerning. That is provided you have a plan to exit out of that situation and the cash to cover shortfalls until that time.

Is there a specific reason you cannot have negative cash flow? If it is just your own metrics, then continue to pay on the lease. (Another option is to terminate the lease early and sell the car, and buy something that you can do so with cash.)

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  • well for one thing the cash I have saved is earning next to nothing in interest. if i could reduce what is effectively an interest expense it would be investment paying a guaranteed return.
    – Andy
    Commented Apr 7, 2022 at 0:51

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