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Automakers use these attractive “sign and drive” leases—as they are normally called—to put more of their vehicles on the road and to demonstrate revenue growth. While they are more commonly offered as a leasing arrangement on new cars, sign and drive auto loans for new vehicles are not unheard of.
The concept of a sign and drive lease sounds simple: You get a new car sans the down payment, and you eliminate the upfront costs generally associated with leasing or buying a vehicle.
But sign and drive deals can sometimes be misleading to car shoppers, so it’s important to understand how they work and how your no-money-down deal could impact your financial life.
Put yourself in the driver’s seat during the car shopping process by considering these five sign and drive nuances before signing on the dotted line:
1. You’ll need a high credit score.
In order to qualify for a sign and drive lease, you’ll likely need a high credit score. This is because a consumer with a low credit score and no down payment will pose a high risk for lenders.
The credit score you’ll need for a sign and drive deal will vary based on the lender and car manufacturer, but you could be required to have a score around 675 or above, says Scot Hall, executive vice president of operations at Wantalease.com.
2. Your monthly payment could be higher than expected.
The monthly payments on a sign and drive deal can be competitive, but make sure you do your homework and comparison shop so that you get the best bang for your buck.
In general, with a standard lease on a new car, where you have to put money down in order to lease the vehicle, your monthly car payments will be less than if you had purchased that same car.
With a sign and drive lease, though, you’ll probably be quoted a higher monthly payment compared to what you’d be offered on a standard lease. This is because manufacturers tend to raise monthly payments in order to make up for the lack of an initial down payment.
However, if you go into a dealership for a sign and drive lease and realize the monthly payments are beyond your means, you aren’t out of luck.
“Even in a sign and drive situation, if a consumer would like [the] payment to be lower, he or she would still have the option of putting money down and dropping it even further,” Hall says.
(Read: Should I Buy or Lease a Car?)
3. You’ll still be hit with fees.
Even though you aren’t putting any money down, you’ll still need to open your wallet when it’s time to sign your deal in order to pay taxes, title, and registration fees. While these fees could seem relatively insignificant after saving on the upfront cost of a down payment, it’s important that you still budget for them.
4. Your lease terms and mileage could be restricted.
Unlike other leasing options, a sign and drive deal could require you to sign on for a designated lease term—27 months, for example—and you may have a mileage cap that’s lower than most standard lease arrangements.
But Hall says mileage can be a point of negotiation, and car shoppers can generally add miles to their lease if they are willing to increase their monthly payments.
“In the lease scenario, be realistic about what your mileage needs might be,” Hall advises.
5. The offer may only be good for the standard factory model.
Many sign and drive deals apply only to standard factory models, so you could be disappointed if you’re hoping for a car packed with add-ons and special features. Make sure to talk with your dealer so you understand how the program works, but most sign and drive deals will not allow you to make any upgrades to the vehicle.
Read the fine print.
The auto market is currently experiencing historic highs in leasing, according to Hall. In addition, leasing, including the sign and drive variety, could be a good option for drivers who want to “change vehicles on a more frequent basis while doing it on a cost-effective basis as well,” he says.
Before signing on to any lease, make sure to read the fine print so you understand all terms and conditions and can make the best decision based on your credit and finances.
Ilyce Glink is the author of over a dozen books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In! Her nationally syndicated column, “Real Estate Matters,” appears in newspapers from coast-to-coast, and her Expert Real Estate Tips YouTube channel has nearly 4 million views. She is the managing editor of the Equifax Finance Blog, publisher of ThinkGlink.com, and owner of digital communications agency Think Glink Media. In addition to her WSB radio show and WGN radio contributions, she is also a frequent guest on National Public Radio. Ilyce is a frequent contributor to Yahoo and CBS News.
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