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What Is a Lease Disposition? Hidden End of Lease Fees

What Is a Lease Disposition? Hidden End of Lease Fees
Kelly Boyer Sagert

Kelly Boyer Sagert

Updated November 16, 2021
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
If you’re new to leasing vehicles, you might feel inundated by industry lingo or generally unsure of how car leasing works. 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. 

Are You Required to Pay a Car Lease 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. When you’re leasing a vehicle, check the agreement to see if 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 prepping 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 perhaps 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. 
  • 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 per year x a three-year term = 45,000 miles) before triggering an extra per-mileage fee. This fee often ranges between $0.15 and $0.30 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%)
Breaking the lease agreement by not paying end-of-lease fees, then, could be problematic for a person’s credit score because it involves unpaid debt—which lessens the quality of their 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. 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 that is a non-disposition fee lease.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.

How 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?

Going to Another Dealer If the Car Is Worth More Than Its Residual Value

The leasing agreement will list a residual amount (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 so 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.

Selling the Car Privately If It's Worth More Than Its Residual Value

Here’s another (somewhat more complicated) process. 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 into their name. Warning! If the buyer doesn’t complete this within ten days, you might both be charged sales tax, which would probably prevent this from being a profitable transaction for you. 

Refinance 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. If you’re auto loan refinancing with Lantern, you can fill out one simple application to receive refinance offers from multiple partners in our network. You can compare the offers from top lenders to find the one that best suits your needs. 

The Takeaway

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. There are other end-of-lease fees that may be charged and, if you’d like to reduce those fees, negotiate them at the time you sign the lease agreement. (Simply not paying them can affect your credit scores.) 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. 
Photo credit: iStock/Ivan-balvan
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit (https://www.consumer.ftc.gov/topics/credit-and-loans)The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC1021227

About the Author

Kelly Boyer Sagert

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.
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