A sign and drive lease lets you drive your new lease home without paying certain initial costs, like a down payment, upon signing. These costs are rolled into higher monthly rates instead.
If you’re itching to lease a new car but don’t have the funds to pay hefty upfront costs, a sign and drive lease can spare you some penny-pinching and get your lease going faster. But can you really leave your checkbook at home?
To help you navigate these questions, Jerry, the super app saving millions of drivers money on car insurance, has put together a guide. From pros and cons to eligibility requirements, here are the ins and outs of sign and drive leases.
What is a sign & drive lease?
You may have seen sign and drive lease specials advertised in dealership commercials, but what do these offers actually mean?
Simply put, sign and drive leases are exactly as they sound: you sign the paperwork for a car lease, then drive away with the car. There is typically no initial exchange of money. Instead, the costs you would normally pay before driving off the lot are calculated into your monthly lease payments.
Because sign and drive leases are riskier to dealerships, however, you need to have an excellent credit score to be eligible for one. Often this can mean you’ll need a credit score over 720, but it will depend on the dealership and the finance companies they work with.
Sign & drive lease vs no money down lease
A sign and drive lease and a no money down lease both forego a down payment on closing day. But there is a distinction between the two.
Namely, most sign and drive leases roll all of your upfront costs into your monthly payments, while no money down leases may still come with additional upfront costs aside from the down payment. These due-at-signing costs usually include dealership and acquisition fees, a security deposit, your first month’s payment, and taxes.
That said, many dealerships consider sign and drive leases a type of no money down lease because of their similar financing features. In fact, certain dealers sometimes interchange the two terms. It’s therefore crucial that you verify whether your sign and drive lease requires any payment up front before you arrive penniless to close the deal.
Pros and cons of a sign & drive lease
If you’re worried that driving your Volkswagen crossover off the lot without paying a cent of your lease seems too good to be true, you’re a responsible buyer. There are definitely benefits and drawbacks to a sign and drive lease deal.
Here are some pros and cons to pay attention to.
PRO You don’t have to make a down payment
Arguably the greatest benefit of a sign and drive lease is that you don’t have to spend thousands of dollars on a down payment up front. While this increases accessibility for those who can’t manage significant initial costs, it can also save you money in the event of an accident.
Let’s say another driver is texting and driving and hits your brand new Honda Fit hatchback months after you started the lease. Because your car is totaled, your insurer pays out the claim to the leasing company and your lease contract ends.
Having GAP insurance can help cover the remaining balance you owe to the leasing company after a total loss. However, it can’t cover the down payment you already made. In this case, a sign and drive lease deal would prevent that financial loss because you haven’t paid any lump sums up front.
PRO You can drive your new car off the lot immediately
You don’t have to save up months of paychecks to lease a car through a sign and drive lease offer. All you have to do is show up, sign the paperwork, and then drive off in that shiny new Dodge Durango or GMC Acadia.
Though those hefty initial costs are still rolled into monthly payments, paying out the sum over time rather than all at once enables some drivers to access new leases sooner.
CON Your monthly payments will be higher
The costs of your down payment, security deposit, taxes, and fees don’t just disappear in a sign and drive lease. Instead, they get absorbed into your monthly payments, which means that these payments will be higher.
So if you would rather manage lower monthly payments on that Ram 1500 you’ve had your eye on, you’ll be better off opting to pay more up front.
CON You need an excellent credit score to qualify
You won’t be able to qualify for a sign and drive lease deal if your credit score is low. Generally, this offer is extended only to “the most qualified buyers,” which tends to mean drivers with a credit score of 720 or higher.
Dealerships aren’t always straightforward about this, however. In fact, some no-down deal ads leave this crucial caveat out so that potential buyers (regardless of their eligibility) have an incentive to come to the dealership and pick out a new vehicle. In these cases, sign and drive lease specials serve as marketing ploys, enticing drivers in but ultimately failing to benefit a good number of those interested.
How to make sure you get the best lease deal
Though sign and drive leases are a tempting way to get a new vehicle into your garage quickly, it’s important to do your research first. Here are a few tips to ensure you’re getting the best lease deal possible:
- Know the language: Leases work differently than loans. Your monthly cost is based on your vehicle’s estimated depreciation during your lease term, rather than the total MSRP. Interest, taxes, dealership fees, and down payments are also factored into your monthly rate. Understanding these components will help you calculate car lease payments to decipher whether an offer is actually a deal.
- Look at residual value: When deciding on a model to lease, research the vehicle’s residual value (or resale value). Ideally, you’ll want a vehicle with a high residual value as this will lower your monthly payments. Pricing sites like Kelley Blue Book or Edmunds can be a great place to start.
- Negotiate the sales price: Contact multiple dealers and ask for your vehicle’s sales price, then negotiate with the car salespersons to get the best one. Doing so puts a cap on your monthly leasing costs, so it’s a good idea NOT to mention that you’re planning to lease until after your sales price (or capitalized cost) has been lowered as much as possible.
- Price it out: Generally, you don’t want to pay more than $100 in monthly payments per $10,000 of the vehicle’s MSRP. For a sign and drive lease where you aren’t paying the initial costs up front, this number will be the absolute maximum you should pay per month.
- Set the terms: A good goal is to aim for a 36-month lease term, with a low interest rate (or money factor), that includes GAP insurance. Most leases charge fines for exceeding a certain mileage by the end of the lease, as well—between 12,000 and 15,000 miles is about standard.
- Shop around: There’s a multitude of lease incentives and deals out there if you look for them. While sign and drive leases may be rarer these days, lease deals can still suit your needs in other ways. For example, Buick, Chevrolet, and Cadillac all currently offer shorter-term, 24-month lease deals.
How to find cheap car insurance for your leased vehicle
Leasing a vehicle can be a great way to try out newer models. As an added perk, most leases also include bumper-to-bumper warranty coverage throughout your term.
To amplify this protection, GAP insurance coverage is usually included, as well. But for the full coverage you need to protect your brand new investment, you’ll still have to buy a quality car insurance plan. Jerry can help!
A car insurance savings super app, Jerry instantly finds you the most affordable policies available from over 55 top insurers. Unlike negotiating lease deals, Jerry can do all the heavy lifting for you, too—from transitional paperwork and calls to shopping for lower quotes (even after your policy has started).
The best part? The average Jerry user saves over $800 a year on car insurance, so it’s definitely worth the free look!
FAQ
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When are sign and drive leases a good option?
Shannon Fitzgerald is an insurance writer with five years of experience in publishing and writing. Shannon uses her background in communication to translate complex car ownership topics into digestible content that car owners can use to save time and money. Shannon has written more than 600 articles for Jerry, including on state-specific insurance processes, factors that impact your insurance rate, and car maintenance basics. Before joining Jerry, Shannon was a freelancer writer covering topics such as VR Production and NPO theatre.
Jessica Barrett is a senior insurance writer and editor with 10 years of experience in the automotive and travel industries. A specialist in car insurance, car loans, and car ownership, Jessica’s mission is to create comprehensive content that car owners can use to manage their costs and improve their lives. As a managing editor for a team of writers and insurance specialists, Jessica has edited over 2,000 articles for Jerry on topics ranging from local insurance shopping tips to refinancing car loans with bad credit. Before joining Jerry as a senior content editor in 2021, Jessica created visual content for clients such as Expedia, Vivid Seats, Budget Direct Car Insurance, Angie’s List, and HomeAdvisor. Her content was published in Business Insider, Forbes, Apartment Therapy, and the BBC.
