Mercedes Benz Sign and Drive Leases: The Whole Story

Leasing isn’t rocket science, but it continues to be one of the subjects that readers of the Dave Knows Cars Blog are most interested in and have the most questions about. It’s also one of the most common Google searches that lead people to in the first place, so I’m writing a quick analysis of the Mercedes-Benz “Sign and Drive” lease advertised by Mercedes-Benz nationally for the month of September 2010. I’ve also included links to the two most detailed articles I wrote earlier this year about leasing below.

I paste links to these articles into emails for customers and people interested in learning more about leasing all the time. If you haven’t read them have a look, you may find them helpful in clearing up some common questions about leasing and figuring out if it is right for you or not.

The first day or so of each month Mercedes-Benz releases programs for that month to their dealer network. We all clamour around to get our copies of the interest rates, lease deals, customer cash amounts, whatever they may be featuring that particluar month. Programs do change monthly, so the sale person who says to you at the end of the month “I don’t know if this interest rate will be available tomorrow” is being straight with you, and they never release the new programs until the previous month is really finished.

It’s the beginning of a new model year for most of our models. The 2010s are essentially gone, all we have are 2011 models inmost cases, which is actually good if you’re interested in leasing. The 2011 that you lease today will be worth more at the end of its lease period than the same car you will lease in say, 6 months… which means you pay less depreciation over the life of your lease.

The advertised “SIGN AND DRIVE” lease on the new 2011 Mercedes-Benz C300 4matic Sport for September 2010 breaks down like this:

MSRP of $40,360 (Premium 1 Package car, Automatic Transmission, 4matic All Wheel Drive, in Mars Red, Black or Arctic White)
27 month lease
10,000 miles per year
$0 due at signing, NOT EVEN FIRST PAYMENT*
$455 / month 

*So, what’s with the asterisk? You must pay tax, title, license to the state at the time of signing. Sorry, that’ just how it goes… but it’s probably  probably less than a total of $1500 in MN. Or I suppose you might be able to wrap that into your payments and put truly NOTHING down, but you might need extremely good credit to do that, and even then, the bank may not even let you. You should be prepared to pay that up front, and that’s smarter anyway.

This is a great time to lease because residual values are high… meaning, the car will be worth a lot at the end of your lease, and all a lease really is is you paying the depreciation of the car during the period you have it. It’s a relatively short lease period, interest rates are low, it’s a new model year car.

If you want to get into a new C300 with more equipment, say you want the multi media package, you’re going to add about $2,700 to the MSRP which will increase your payment by about $25 – $30 per $1000 the MSRP goes up. So, it will cost you about an extra $80 per month to have navigation, the 6GB music register, voice control, etc. If you don’t need the Multimedia Package but would like the big Panorama Sunroof the MSRP increases about $1000, sending your payment up to about$490.

If you need 12,000 miles instead of the 10,000 avertised the payment will go up a bit too, how much will depend upon the MSRP of the car you’re looking at, but it’s not crazy, usually between $30 and $50 per month.

As I’ve said in previous columns… it’s very unusual for someone to walk in and say… “I’ll take that lease I saw on TV.” Customers inevitably add some equipment, needs more miles, maybe they want less miles, want a car with metallic paint which adds $750 to the MSRP or are comfortable putting $2500 or $3500 down in order to keep thier monthly payment at a lower level.

That brings up a good point, and an often hotly contested one. People often go on the offensive when I ask them how much money they’re comfortable putting down, “Hey, don’t back me into a corner” (I don’t back people into corners, I give them options, escape routes even!).

Let me put it this way, it costs X to lease a car. You can put $20,000 and have a $100 a month payment, or you can put nothing down and have a $800 a month payment. Money down just pays what you would pay monthly, up front. These sign and drive leases are so great because they require minimal cash out of pocket, and that seems to be what most people are into these days, and the monthly payments are very reasonable considering what you get to drive for the next 2+ years.

When you see lease deals advertised, no matter the manufacturer, they’re usually really low, in fact, Mercedes-Benz often advertises a lease that’s something like $379 a month with $3000 down. While it looks good on TV, I often find it counterproductive on the showroom floor. The fine print on leases like that says…. on a base car, PLUS tax, title, license, fees, and first month’s payment, etc. etc. So when someone comes in all excited that they’re going to get a Mercedes-Benz with navigation and a panorama sunroof and illuminated door sills for $379 a month I have to say “Perfect sir, I’ll get you that $379 a month lease, but I’m really gonna need more like $10,000 down from you today to get you to that payment.” Then the mood changes and I’m the bad guy.

That’s why I like the current sign and drive deal from Mercedes. It’s a decent P1 car, perfectly respectable… add an iPod kit and pano roof and you’re only going up about 50 bucks a month. Minimal money down and you’ve got a nice ride, probably only two oil changes during the whole lease period of 27 months. It’s a fine way to go.

Remember… the keys to leasing…

1) As MSRP goes up monthly payment goes up (about $25 – $30 per $1000)
2) As $ down goes up, payment goes down ((about $25 – $30 per $1000)
3) As miles go up, monthly payment goes up (amounts depend on the specific car)
4) Most advertised leases are on fairly basic cars, but good ones on solid cars exist (like this months $455 / month sign and drive / P1 C class)
5) Tax, title and license are generally NOT included in advertised leases or even in the money down amounts advertised.

That’s how I would sum it all up… I didn’t know anything about leasing cars a couple of years ago, it didn’t make sense to me. If you plan to change cars, or even think there’s a chance you will change cars within 3-5 years of buying it… leasing is you best bet! Or get ready to take a bath on your trade in.

Additional leasing articles I’ve written from months past:

My Leasing article from April 12, 2010
“Mercedes-Benz: Why Lease?”

Another leasing article from May 5, 2010
But What’s the Catch? Mercedes-Benz Sign and Drive Lease

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