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An acquisition fee is a fee you pay when leasing a car or other types of vehicles. It may also be referred to as the assignment, administrative, or origination fee. The fee is generally a few hundred dollars, so it’s critical to factor this cost into your budget when shopping for a car to lease.
What is an acquisition fee?
Almost any time you take out a loan, you must pay the lender an origination fee. This fee generally covers initiating the loan and running a credit check on a consumer. For auto leases, this is known as an acquisition fee and is sometimes labeled a bank or administrative fee. The acquisition fee could be charged upfront or rolled into your monthly lease payments.
How much is an acquisition fee?
An acquisition fee for an auto lease generally ranges from $395 to $895 but may vary depending on the vehicle in question and the leasing company you’re working with, according to Edmunds. Typically, the more expensive the car, the higher the acquisition fee. A luxury vehicle will almost always have a higher acquisition fee than a mid-range sedan.
Unlike interest rates, the acquisition fee isn’t affected by the borrower’s credit score, income or other personal factors.
How do I know if my loan has an acquisition fee?
The easiest way to determine if your lease comes with an acquisition fee is to ask the lender or dealer directly. If you already have the paperwork, read it carefully to ensure you understand all the basics of the vehicle lease, including whether there’s any mention of an acquisition fee.
Lenders are good at hiding fees within the fine print, so it may be difficult to spot. Acquisition fees can also be bundled into your monthly lease payment. Whether it’s paid upfront or part of your monthly lease installments, legally, lenders are supposed to disclose any fees or extra charges if you ask.
There are a variety of fees associated with leasing a vehicle. In addition to a potential acquisition fee, some of the standard fees associated with leasing include excessive mileage fees, disposition fees, early termination fees and a wear and tear fee.
Are acquisition fees negotiable?
Similar to purchasing a car, you should at least try to negotiate. The acquisition fee and other lease features, such as trade-in value, interest rate and loan duration, may be negotiable. If it doesn’t work out, you can always look for a lease somewhere else that doesn’t include an acquisition fee. Manufacturers and dealers often have lease specials that might offer better options, so it’s always important to shop around.
It’s also worth noting that in the rare cases when you can negotiate a lower acquisition fee with a lender, they may raise your money factor in response. Pay careful attention to the terms of your lease agreement before signing on.
How to pay an acquisition fee
If your leasing company charges an acquisition fee, you can choose to pay this expense upfront or roll it into the total cost of the loan.
If you choose the latter option, the acquisition fee will be added to the principal amount of the lease. This increases monthly lease payments and costs you more over the long run due to compound interest.
However, adding the acquisition fee to the loan can be a wise move if you total the car. If you pay the acquisition fee upfront and the car is in an accident, you won’t receive a refund on the acquisition fe,e and you’re out of a car. But if you rolled the acquisition fee into the loan, making it part of your ongoing monthly loan payments for the life of the lease, you at least won’t have to pay the remaining amount.
The bottom line
Acquisition fees can only be avoided if you notice them before you officially sign the contract. If you try to negotiate the acquisition fee with the leasing company and have no luck, consider finding a new offer. Don’t be pressured to accept the lease terms.
Before finalizing a lease agreement, contact several companies to see what kind of terms you qualify for. Shopping around is the best way to minimize or avoid the acquisition fee.