Volkswagen Sign Then Drive Lease Deal: Is It Worth It?

Volkswagen Sign Then Drive Lease

If you’ve shopped around for a Volkswagen — or any car for that matter — in recent years, you’ve probably heard about sign and drive lease deals. This type of lease seems pretty straightforward: You sign a dotted line and drive away with your dream car.

But sign and drive deals are not as easy to qualify for, or nearly as cheap as you might think. Here’s an in-depth look at sign and drive leases, as well as how to qualify for and afford one.

Read: 36 Cars You Can Finance for $300 or Less

What Is a Sign and Drive Lease?

A sign and drive deal is a leasing or purchasing option offered by dealerships. Instead of shelling out thousands of dollars on a car down payment, a sign and drive deal allows you to sign some paperwork and drive off the lot with a new car. In essence, you’re rolling all the costs for leasing the car into your monthly payments.

Keep in mind, however, that a sign and drive deal doesn’t mean you won’t have to pay taxes or title and registrations fees at the dealership. With this type of lease, you’re also likely to have higher monthly payments. On the other hand, you don’t need a lot of money upfront to get the car you want.

The Volkswagen Sign Then Drive Event

Volkswagen sign and drive reviews are pointedly positive for the manufacturer’s annual Sign Then Drive Event. Its 2015 event lasted from November through early January, allowing customers to drive home in brand new cars, from the Passat to the Tiguan.

As one of the best lease deals available, the Sign Then Drive Event draws large crowds looking to get into new cars before the new year. Here’s a look at the 2015 Sign Then Drive Event:

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You don’t have to wait for this annual event to get a great deal on a lease. Speak with your local Volkswagen dealership to learn about ongoing specials in your area. Keep in mind that VW sign and drive qualifications will vary depending on where you live.

How to Qualify for a Sign and Drive Lease

Sign then drive lease deals can be a good option for people without cash on hand for a new car. However, while these types of deals might appeal to most drivers, only those with high credit scores will qualify. Although standards vary according to car dealer and manufacturer, you can expect minimum sign then drive credit score requirements around 675, according to, which helps people compare lease deals.

The main reason why car dealerships aren’t privy to offering sign and drive leases to customers with less-than-stellar credit scores is because of the inherent risks that come with a zero-down lease. If you are more liable to default on your lease, your lender won’t want to risk losing money on a new car, especially when they don’t have a down payment to fall back on.

The Real Cost of a Sign and Drive Lease

Even though sign and drive deals might boast $0 down offers, you’re liable for taxes, registration, title fees and other costs. However, because local taxes and dealer fees vary, you’ll need to call your local dealer ahead of time to learn how much you can expect to spend on leasing fees.

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Key Terms When Calculating Car Lease Payments

If you want to calculate the cost of monthly payments for leasing a car, you’ll need to gather a few numbers:

Vehicle MSRP

A vehicle’s MSRP is also called the sticker price. It’s what you can expect to pay for a car before taxes and other fees.

Lease Factor

The lease factor or money factor is the interest rate of your lease. To convert the interest rate of your lease to the money factor, divide the rate by 2,400. For example, if your interest rate is 4 percent, the money factor will be 0.00166. You will use the money factor to help calculate your monthly payments.

Lease Term

Your lease term determines how long you get to keep your car. A 36-month lease is typical.

The Car’s Residual Value

The residual value of a car is its value after the end of your lease. A residual value percentage between 45 and 60 percent is typical for cars on 36-month leases. That means that at the end of your lease, you can expect your car to be worth between 45 and 60 percent less than what it was worth at the start of your lease.

Read: How 5 Personal Finance Experts Financed Their First Cars

How to Calculate Your Monthly Payments

To calculate your car’s monthly payments, follow these steps:

1. Calculate Your Car’s Residual Value

Multiply the vehicle MSRP by the car’s residual value percentage. For example, assuming your car has a $20,000 sticker price and 60 percent residual value, its residual value will be $12,000.

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2. Calculate Your Base Monthly Payment

To estimate the base monthly payment of your car, subtract your car’s residual value from how much you paid for it. Say, for example, you negotiated the cost of the car down to $18,000. In this example then: $18,000 – $12,000 = $6,000.

This means that over your lease term, you will be using $6,000 of the car’s value.

To determine your base monthly payment, divide $6,000 by 36 months, your lease term. This amounts to a base monthly payment of $166.67. Keep in mind your base monthly payment does not include taxes, fees or interest.

3. Calculate Your Monthly Interest Cost

To calculate how much you’ll be paying in interest each month, add the MSRP of the car with how much you paid for it. In this example: $20,000 + $18,000 = $38,000. Then, multiply this amount by the car’s money factor. Assuming a 4 percent interest rate, the money factor will be 0.00166. So: $38,000 x 0.00166 = $63.08 per month in interest.

4. Add Your Base Monthly Payment and Interest Cost

To calculate your total monthly payment, add your car’s base monthly payment and its monthly interest cost: $166.67 + $63.08 = $229.75. Remember that this amount does not account for taxes and other fees.

Common Leasing Fees

If you choose to lease a car — whether it’s a VW Golf or Toyota Prius — be prepared to pay some, if not all, of the following fees:

  • Local taxes
  • Acquisition fee, also called a bank fee
  • Title, license and registration fees
  • Property taxes
  • Documentation fee, or administrative fee
  • Refundable security deposit

Combined, these fees are known as drive out costs, or the cash due at lease signing. At the end of your lease, expect to pay a disposition fee, which is a fee charged by the dealership or leasing company. They use this fee to compensate for the cost of selling a lease vehicle.

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Extra Mileage Fee

If you drive your leased car a lot and go over your allotted mileage, be prepared to pay a fee for every extra mile. Extra mileage fees vary by leaser, but you can expect a charge somewhere between $0.10 and $0.30 per mile.

Lease Fees for Car Damage

During your end-of-lease inspection, be prepared to pay fees for any damage that goes beyond typical wear-and-tear. How much you’ll pay for dings, cracks and other damage varies by leaser. Sometimes, your inspector will measure the size of scratches and other damage and then, using a template, calculate how much you owe.

Is a Sign and Drive Lease Right for You?

If you’re considering a sign and drive lease, make sure it’s the right choice for you. If, for example, you absolutely cannot put money down but you need a car, a sign and drive deal can be a good option for you. Just be certain you can afford higher monthly payments.

You might also want to consider whether a lease is a good idea. Consider these factors before signing a car lease:

  • How much you can afford to pay each month
  • How far you commute to work and drive on weekends
  • Your history of accidents
  • Where you park your car and incidence of break ins

See: 11 James Bond Cars Worth More Than Your Mortgage

It’s important that you consider whether you want to lease a car at all. It’s no secret that leasing isn’t for everyone. While leasing has grown in popularity in recent years, data shows that only 31.46 percent of new cars were leased in Q1 2015, according to Experian.

The reason some people prefer to buy is obvious: They don’t have to give their vehicles back once the term ends. But for someone who prefers to trade in cars every few years, more money can be saved by making smaller monthly payments through a car lease.

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Before deciding whether to accept the terms of a sign then drive lease, or any type of leasing option, consider your personal circumstances to determine how long you plan to keep the car, whether you want to resell eventually, and how much you plan to spend in the short and long term. Making these determinations can help you decide whether leasing under any condition is right for you.

Stacey Bumpus contributed to this article.


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