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Do down payments and security deposits that have to be paid up front on an asset have a major influence on the lease or loan option?
Wiki User
∙ 18y ago
For down payments absolutely. Any money pre-paid on an asset that will be purchased with either lease or loan, will reduce the total debt due. This reduces the monthly obligation (cash going out) and reduces the total interest amount paid over the duration of the loan. A security deposit is completely the opposite. The money paid into a security deposit accumulates interest money for them, not you. It also doesn't reduce your debt to them so you pay more in interest. You will also pay more per month because the total due is higher. I have never paid money into a security deposit in 40 years of business and never would. I have however paid 50% or more towards a down payment.
Wiki User
∙ 18y ago
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Do factors like down payment and the security deposit that has to be paid upfront on an asset have a major influence on a lease or loan option?
Large down payments or security deposits will increase the net present value (NPV) of the loan or lease option. If either the lease or the loan requires a large security deposit or down payment, this will increase the NPV of that option making the other option more appealing. This is due to the devaluing of money over time. If a large down payment is required upfront, that amount of money is not devalued. Payments, as time goes by, are less valuable.
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for security purpose
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