Acquisition fee

What is an acquisition fee?

An acquisition fee is one charged by some auto leasing companies for originating the loan, just as mortgage lenders charge points as an origination fee. This fee is often not specified in a contract but rolled into the capitalized cost when calculating monthly payments.

Deeper definition

Acquisition fees are mostly found in car leases and do not come into play during the purchase of a car or when seeking a loan for the purchase of a vehicle.

Generally, acquisition fees are put into play to cover a dealer’s incurred expenses for the following:

  • Getting the lessee’s credit
  • Going over the lease documents.
  • Verifying the lessee’s insurance documentation.

The acquisition fee is not discussed during the negotiation of the lease or when the lessee goes to purchase additional financial products for their vehicle. Usually, it’s simply wrapped into the overall cost of the lease, which is then paid monthly throughout of lease term.

Savvy consumers can get out of paying acquisition fees if they ask questions regarding these fees upfront. In the case of an auto lease, this fee is superfluous and usually can be avoided through pointed negotiations.

Acquisition fees are not wholly unique to the auto industry and can crop up during property sales as well. Often the use of the term in this context refers to the charges and commissions that are paid for the purchase of the property and may include:

  • Closing costs.
  • Real estate commission.
  • Development and construction fees.

Often in these cases, acquisition fees are paid upfront to avoid incurring extra interest over the life of the loan.

Acquisition fee example

If you are leasing a car, a portion of your vehicle cost may include an acquisition fee. This cost could be anywhere from $300 to $1,000. Talk to your dealer about this fee and see whether you can get it removed from the total vehicle cost.

If you cannot get the fee waived, try to pay it upfront to avoid rolling it into the total cost and bumping up the interest payments on your lease.

Curious about how to sidestep common pitfalls associated with leasing a car? Learn more about the top five auto lease mistakes to avoid.

Other AutoTerms

More From Bankrate