Downpayment vs. Due at signing: Understanding the subtle art of knowing where your money goes
Make sure you know what you’re signing
The problem is that oftentimes dealers will use different phrases interchangeably that mean different things, so it’s important to read the fine print carefully in order to make sure you know exactly what you’re paying for. Keep in mind that sometimes fees and taxes aren’t rolled into the due on signing price. Ask all the questions you can to ensure no funny business.
Zero due at signing and zero down payment are two very different things
Zero down has nothing to do with due on signing. A down payment is just the amount of money you put down at lease signing in order to distort the monthly payment. For example, if your monthly payments are $500 per month for a 3 year lease term and you put zero down, then your monthly payment remains what it is and at the end of your lease term you’ll end up paying $18,000 ($500 * 36 months). If you put $5000 down, then you end up paying $13,000 ($18,000 – $5000).
$13,000 divided by the 3 year lease term comes out at $361 per month instead of the original $500. As you can see, the amount of money you pay stays the same regardless, it’s just a matter of paying it now or later.
Due on signing, on the other hand, is a totally different animal. When you go to a dealership, you’re going to have to pay money due on signing regardless of how much money you put down. The money due on signing go toward your sales tax, bank fees, first month’s payment, and document fees.
If you really want to leave a dealership paying absolutely no money out of pocket, you could roll your due on signing into your monthly payments but, again, it’s just a matter of postponing when you’re paying the same amount of money.
Quickly looking at the below advertisement, you’d probably guess that this car is $0 down and $329 a month. If you read the fine print you’d see that the monthly payment has due on signing, taxes and fees rolled into the payments, meaning that if you just paid the due on signing when you’re meant to pay it, your monthly payment would likely drop a significant amount.
Considering the above advertisement, you’d (rightfully so) assume that the deal here is for $249 and $0 down. Reading the fine print, however, you’d realize that your first month’s payment and DMV fees are additional payments not included in the price advertised.
All in all..
Understanding what a good deal constitutes takes a lot of research, practice, and patience. Don’t believe everything you see and hear, and make sure to ask all the questions your heart desires. If your dealer doesn’t find you annoying, you’re not doing enough to get a good deal. And always, always, read the fine print.