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A lease disposition fee is a charge that you may incur at the end of your vehicle lease term if you choose not to buy the car. This fee covers the costs the leasing company incurs to inspect, refurbish, and resell the vehicle. To help you decipher a lease agreement, this article will answer the question, “What is a lease disposition fee?” along with several related questions to help you proceed with confidence.
What Is a Disposition Fee?
A disposition fee is a fee a leasing company may charge you when you return a car at the end of your lease period. The fee is meant to cover the costs of cleaning and preparing the car for a potential buyer. Although not all leasing companies charge a disposition fee, many do.
Are You Required to Pay a Car Lease Disposition Fee?
A leasing company may require that you pay a car lease disposition fee. You can check your lease contract to see whether there’s a leasing disposition fee and, if so, how much you’ll be charged. If the agreement includes one — and you sign that agreement — then you will likely need to pay that fee. You can always ask to have it waived at the end of the lease term, but that doesn’t mean it will be.If there’s not a disposition fee in your contract, you probably won’t be asked to pay one.
When Do You Pay the Disposition Fee?
The disposition fee is paid when you return the vehicle at the end of your lease period. If you want to know in advance what it will be, check your contract. But be aware that it’s just one of several potential end-of-lease fees that you may have to pay, as we’ll discuss shortly.
How Much Is the Car Lease Disposition Fee?
Sometimes called a turn-in fee, a car lease disposition fee can vary from contract to contract. Typically, it ranges from $350 to $500.
What Is the Disposition Fee for?
This charge is intended to cover the costs of cleaning up the leased vehicle after you return it. It also covers any other expenses the dealer incurs in preparing it for its resale as a used vehicle.
Additional End-of-Lease Fees
Other types of fees you might be asked to pay at the end of your car lease include the following:
Early Termination Charge
If you want to end your lease before the agreed-upon date, the leasing company will likely charge an early termination fee. Under some agreements, you’ll need to pay this termination charge even if you ended the lease in order to purchase the vehicle.
Purchase Option Charge
If a leasing agreement allows you to buy the vehicle at the term’s end for its residual value (which will typically be specified in the lease contract), you may need to pay this fee. It will generally run you a few hundred dollars. Depending upon the lender, you may be able to include this fee in the amount you borrow to buy the vehicle.Lease buyout loans are one of the types of car loans you may consider if you have a lease and need to borrow money to become a car owner.Getting out of car leases early is something you may pursue through a lease buyout, lease transfer, early termination, or buying another car.
Damage/Excessive Wear-and-Tear Fees
When a leased vehicle is returned, an inspector will examine the vehicle for dings, dents, scratches, cracks, rips, tears, burns, stains, or signs of excessive wear. A fee may be assessed if the damages go above and beyond what’s typical.
Excess Mileage Fees
In the lease agreement, you’ll have a maximum number of miles that you can put on the car (perhaps 15,000 miles per year over a three-year term, or 45,000 miles in total) before triggering an extra per-mileage fee. This fee often ranges between 15 cents and 30 cents per mile that you drove over the maximum limit, depending upon the type of vehicle that you leased.
How Might Failing to Pay End-of-Lease Fees Affect Your Credit?
First, here’s a quick look at factors that affect your credit. Using the FICO® score (there are actually a number of different credit scores), these are the five factors and how they’re weighted:
Payment history (35%)
Debt amounts owed (30%)
Length of credit history (15%)
New credit/recent inquiries (10%)
Credit mix (10%)
What happens if you don’t pay disposition fees that you owe? Breaking the lease agreement by not paying end-of-lease fees could be problematic for your credit scores because it involves unpaid debt — which lessens the quality of your payment history. This can make it more difficult to get a good deal when it’s time to shop for an auto loan again.
How to Avoid Paying Fees
To avoid paying car lease disposition fees, as well as other fees, be strategic about negotiating your lease agreement to get the best deal you can. Tips to help you do so include the following:
Understand leasing terminology before you begin to negotiate.
Ask about the cap cost (the price of the vehicle).
Be clear on mileage limitations and overage fees (as well as any other fees).
Compare interest rates and APRs (as well as potential fees) from multiple dealers.
Let the leasing company (the “lessor”) know if you plan to buy the car.
Armed with this knowledge, you can then negotiate the lease, including its fees, to try to reduce what you’ll need to pay. Some leasing companies may charge an up-front car lease acquisition fee for approving your auto lease financing contract.You may negotiate any up-front and end-of-lease fees. The lessor doesn’t have to say “yes” to everything you want, but negotiating with several of them will likely get you a better deal, perhaps one free of disposition fees.If you have already signed your lease, then it’s important to make sure you understand all of the fees for which you could be liable. Then do what you can to avoid incurring them, whether it’s keeping your car clean and in good condition or making sure you don’t exceed your mileage allotment.
3 Ways to Get Extra Money at the End of a Lease
Interestingly enough, when your lease ends, you can turn the car in to any dealer — meaning that it doesn’t need to be where you originally leased the vehicle — and let that dealer buy it. So, how could that help you?
1. Going to Another Dealer
The leasing agreement will list a residual amount, which is the amount that you can pay for the car at the end of the lease term. The residual amount is an estimate of what the vehicle’s value will be at that time.Sometimes, though, the car will be worth more and you’ll have equity in the vehicle.In that case, if another dealer will pay you more for the vehicle than the residual value, they can pay the leasing company the residual value and give you a check for the difference.
2. Selling the Car Privately
Sometimes, you may be able to sell a car privately for more money than a dealer would give you in trade-in value.So let’s say that you could make more money by selling your leased car privately. If you find a buyer you can trust, then this person could mail a check for the vehicle buyout amount to the leasing company.The leasing company would then release the title to you (the person who leased the car, or “lessee”). Once you receive it (and any difference between the buyout value and what you’ve agreed the new buyer will pay you), you can then sign over the title to the new owner. The buyer would then register the car in their name.Warning! If the buyer doesn’t complete this within 10 days, you might both be charged sales tax, which would probably prevent this from being a profitable transaction for you.
3. Refinancing Your Car
Although we’ve been talking about buying your vehicle at the end of the lease’s term, if you decide to keep the car, it’s really a refinance. As far as the refinance timeframe with a leased vehicle, check your lease agreement to see when you need to provide notification of your intent to refinance the car.Recommended: 8 Tips on How to Refinance an Auto Loan
Tips for Leasing Your Next Car
Below are several tips for leasing your next car:
Compare Rates
Leasing vs. buying is a form of financing that allows you to operate a car in exchange for paying a monthly rent charge. Car leases typically include lower monthly payments than auto loan financing, but you can still compare lease rates to identify the leasing offer that’s right for you.
Calculate Your Commute
Calculating your annual driving needs may help you find a leasing offer that’s right for you. Leasing companies generally limit the number of miles you may drive in their vehicle. For example, your leasing contract may permit up to 12,000 miles per year on the odometer. The lessor may impose excess mileage charges if you exceed the limit, so calculating your commute may help you identify mileage terms you need in a leasing agreement.
Pick a Car That Fits Your Budget
You can pick a car that fits your budget when looking for a car lease. The average monthly payment on a new car lease in 2024 stood at $516, according to FINN.Some vehicles cost more to lease than other vehicles. The average monthly payment to lease a 2024 Honda HR-V stood at $378, while the average monthly payment on a Ford F-150 stood at $600, according to Edmunds.
Negotiate
You can negotiate with leasing companies for lower rent charges and higher mileage limits, among other things. The initial quote that a leasing company may offer you is not necessarily its best offer. Negotiating short-term car leases, for example, may provide you with leasing terms that are right for you.A short-term car lease can be anywhere from 12 to 24 months, while a long-term lease can be up to 60 months. Even extending a lease on a car can be up for negotiation.
Compare Car Refinancing Rates
Leasing companies often include a disposition fee in agreements when someone leases a vehicle. Typically ranging from $350 to $500, this fee is due at the end of the term and covers the dealer’s costs to prep the vehicle for resale. At the end of the lease, options include turning in your car, shopping it around to see if you can leverage equity, or refinancing the vehicle into your own name.Lantern by SoFi can help you explore your auto refinance rates. Just fill out one easy form, compare your options, and select an auto refinance lender of your choice.Find and compare auto loan refinance options with Lantern.
Frequently Asked Questions
Can disposition fees be negotiated?
Is there a way to avoid disposition fees?
What is the point of a disposition fee?
Photo credit: iStock/Ivan-balvan
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About the Author
Kelly Boyer Sagert
Kelly Boyer Sagert is an Emmy Award-nominated writer with decades of professional writing experience. As she was getting her writing career off the ground, she spent several years working at a savings and loan institution, working in the following departments: savings, loans, IRAs, and auditing. She has published thousands of pieces online and in print.
