Every lease ad has two numbers: the monthly payment, and a smaller line underneath saying how much is due at signing. The second number is where lease offers quietly differ, so it is worth knowing what goes into it.
This is part of how lease payments are calculated.
What is usually included
The first month's payment. Most leases collect the first payment at signing.
Taxes. How much depends on your state. In states that tax each payment, you pay tax on the first payment and on anything else taxable collected up front. In New York and New Jersey the tax on the whole lease is typically collected at the start, which can make due at signing noticeably larger. See sales tax on a car lease.
Title and registration (DMV) fees. The cost of registering the car and getting plates.
The acquisition fee. A fee charged by the lender for setting up the lease. It is sometimes rolled into the lease instead of paid up front.
The documentation fee. A dealer fee for processing paperwork, capped by law in some states.
Any down payment. Officially called a capitalized cost reduction. This is optional, and it is the part of due at signing that most affects your monthly payment.
A security deposit, if the lender requires one or you choose multiple security deposits.
Why two identical payments can cost different amounts
Two dealers advertise the same car at $399 a month.
- Dealer A: $399 a month, $3,999 due at signing
- Dealer B: $399 a month, $1,999 due at signing
Dealer B is $2,000 cheaper. Much of Dealer A's due at signing is a down payment used to bring the monthly figure down.
The way to compare is the effective monthly cost: add the total of the payments to the due at signing, and divide by the term.
- Dealer A: ($399 x 35 + $3,999) / 36 = $499 a month
- Dealer B: ($399 x 35 + $1,999) / 36 = $443 a month
We use 35 payments because the first one is already inside the due at signing figure. Always check how the lender structures it.
"Zero down" is not "zero due at signing"
These are different things, and the difference catches people out.
Zero down means no capitalized cost reduction. You still pay the first month, fees, taxes and registration at signing.
Zero due at signing, sometimes called a sign and drive lease, means nothing at all up front. Those costs are rolled into the lease instead, so the monthly payment is higher.
Both are legitimate. Just make sure you know which one you are being offered.
What to check in an advertised offer
Lease ads print a due at signing figure, but what it includes varies. Before comparing, find out:
- Does it include taxes and DMV fees, or are those extra?
- How much of it is a down payment?
- Does the payment assume an incentive you may not qualify for, such as loyalty cash? See car lease incentives.
- What are the term and annual mileage? A lower payment on a lower mileage allowance is not a like for like comparison. See car lease mileage limits.
How much should you pay up front?
As little as you reasonably can. A large down payment does not lower the total cost of a lease, and in a total loss it is generally not returned. How much to put down on a lease makes the full case.
The short version
Due at signing usually covers the first month's payment, taxes, DMV fees, the lender's and dealer's fees, and any down payment. Compare offers by effective monthly cost, not by the headline payment.
If you want an offer's due at signing broken down line by line, send it to us.
