Why a ‘One-Pay Lease’ Could Be The Best Way to Buy a New Car

When it comes to buying a new car, you’re probably familiar with the most popular methods of paying for it including financing, leasing, or paying cash. But have you heard of a “one-pay lease?” It’s a departure from the normal method of paying for a car in payments, however, it could be the best way to buy a new car depending on your financial situation.

What is a one-pay lease?

A one-pay lease, also known as a “single-pay lease,” is a lease agreement where you pay the entire lease upfront. That’s right, you won’t have any monthly payments or tax to worry about for the duration of the car’s lease term and, in the end, you can turn it back in, buy it, or trade it just like you normally would at the end of a lease.

If you choose to buy out the car at the end of the lease term, you will pay for the “residual amount” of the car just as you would normally do at the end of the regular lease. While the one-pay lease method doesn’t work for everyone’s financial situation, it can have a lot of advantages and savings for those who can take advantage of it.

Man at car dealership looking at brochure
Man at car dealership looking at brochure | Getty Images

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Advantages of a one-pay lease

One of the biggest advantages of going with a one-pay lease is the break on the interest. In a normal lease, the interest that occurs on each monthly payment that you pay can easily add up to hundreds, and even thousands, of dollars over the course of the lease. However, with a one-pay lease, lenders will typically give you a better interest rate because you’re paying the whole amount in one lump sum, therefore, there is no risk on their end.

Also, if you happen to be in a “challenged credit” situation, but you happen to have a lot of money saved up, then you will still have good odds of getting approved for the lease since you’re paying it all upfront. Also, since you paid for the lease upfront, the lessor will report to the credit bureaus that the lease was paid in full and on time, which will have a positive effect on your credit. And lastly, the main advantage of a one-pay lease is that you won’t have to worry about making monthly payments.

Car Lease
Car Lease | David Paul Morris/Bloomberg

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Disadvantages of a one-pay lease

For every positive, there’s a negative, and a one-pay lease option is no exception. One of the main disadvantages of doing a one-pay lease, and the most obvious one, is that you’ll have to pay for the entire lease upfront. Depending on the car that you choose, you’ll likely have to spend $12,000 to $25,000 upfront, which can be a lot for most consumers. However, it’s a great alternative to completely buying a car outright since you’re only paying for the initial depreciation of the car.

The main risk that you face when doing a one-pay lease is if you happen to crash the car and total it or if it gets stolen. Your insurance company will most likely pay you the “market value” of the car, which may not be equal to the amount that you paid upfront. Therefore, you could lose out on a lot of money that you paid for the lease upfront.

Cars stand on display for sale at a Mercedes-Benz dealership during the coronavirus crisis
Mercedes-Benz models available for lease at a dealership | Sean Gallup/Getty Images

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Is a one-pay lease right for you?

The next time you plan to buy a new car and have a lot of money to put down, or if you’re planning to just pay for the entire car in cash, then we recommend asking about a one-pay lease. Don’t be surprised if the salesperson is a tad bit confused when you ask them about it since one-pay lease customers aren’t too common, however, they’ll be glad you did in the end, just like you will, since it will be all said and done.