If you’re in the market to buy a new car, you may be swayed by the “sign and drive” leases that many car dealerships offer. It’s tempting to show up to a car dealership and drive away in a car without ever having put any money down. However, the “sign and drive” offers you often see advertised in car commercials aren’t nearly as good as they may initially seem. Here are a few reasons to avoid this type of car deal:
If you think “sign and drive” deals sound too good to be true, you’re correct. Most of the offers, as explained in the fine print, are only available to people with excellent credit. The people most likely to take advantage of such deals are usually denied because their credit score is too low to qualify.
The deals often advertise that you’ll be able to drive away from the car dealership without paying anything until a later date. While you might not be putting any money towards the payment of the car itself, you’ll most likely still be responsible for the title, registration, and taxes associated with the purchase. If you thought you could walk out the door without spending any money from your own pocket, you’ll be sorely disappointed.
A lot of these deals also come with a contract that stipulate you’re only allowed to drive a certain number of miles per year. If you go over the mileage amount, you’re charged with additional fees.
Specific Lease Term
Many of the leases that are part of the program also come with a specific lease term. This can be anywhere from 24 months to 36 months, and while the timeline will depend on your specific dealership, the term limit is almost always non-negotiable.
While it may be nice not to have to pay anything when you sign for your new car, that decision will come back to haunt you because you’ll most likely end up paying more for your monthly payments later on. For instance, putting a down payment of $3,000 upon signing the lease for your new car might mean that your monthly payment is only $200 whereas having a “sign and drive” might mean that your monthly payment is $300 because you have to make up for the money you didn’t pay upon initially signing the contract.
Only Certain Vehicles Allowed
You know how those car commercials on television always advertise deals for the top of the line cars? Well, there’s a very good chance that when you go to the dealership, those cars won’t be included in the leases they offer. Many of these deals are only for the base-level vehicles, and do not allow you to upgrade anything on the car. That means if you’re hoping to drive away in a new vehicle with special features like heated seats and tinted windows, you might want to think twice.
Sometimes, the zero down finance price will end up being more expensive than the price you would have paid if you had given a down payment. This is often because the dealership can get away with charging more money for a leased vehicle than one you will eventually own. Before you go ahead and agree to that “sign and drive” lease, make sure you determine whether the finance price is actually in your best interest.
Changes Will Cost You
While the cars available for these deals are usually the factory standard models, some dealerships do allow you to upgrade your model or extend the terms of your lease. The catch is that doing so means that your monthly payments will go up significantly. Depending on what additions you want to make – whether it’s features inside the car or extending the mileage restrictions – you might want to consider whether paying to own the car would be better for you in the long run.
If you happen to come into a financial situation which means that you’re unable to afford the monthly payments, the car dealership will most likely take back the car and sell it to another buyer. If the car happens to be sold for less than your outstanding lease agreement, you’re still responsible for paying the difference.
Owning Versus Leasing
Of course, there’s a very big difference between owning a vehicle and leasing. For one thing, you can’t claim your car as a financial asset since you don’t technically own it. For another, if you decide to buy the car at the end of your lease, you’ll end up paying more money than you would have if you initially bought it. Additionally, you’re also held to certain standards when you lease a car, and as such, if you end up doing irrevocable damage, you’re not only responsible for repairing the damage, but you’ll more than likely have to pay a steep “wear and tear” fee as well.