What is a disposition fee?

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When you return your lease, you’ll give up a hefty monthly car payment, but you may still be charged to return your vehicle for the sake of bringing it back.

The leasing company charges a disposition fee to clean up your car before it puts the car back on the market to sell. Here’s why this fee exists and how to avoid paying it.

What is a disposition fee?

A disposition fee, or a turn-in fee, is a charge to return your leased vehicle. The leasing company charges this fee to cover the cost of cleaning up and repurposing your old car for the sake of selling it. The flat fee can range from $350 to $500.

The fee is separate from your monthly payment. It might get charged with other types of fees, like an early termination charge, excessive mileage charge and wear-and-tear charge.

Do you have to pay the disposition fee?

For the most part, if a disposition fee in your leasing agreement, it’s not negotiable. However, if you have one in your contract, you can avoid it by purchasing your leased vehicle or signing onto another lease.

Sometimes companies don’t charge a disposition fee, so if you’re unsure, ask about it before you sign your leasing agreement. There’s a chance that you could ask for it to be waived and avoid paying it when you turn in your car, but you’ll need to do it before you sign your agreement.

Other auto leasing fees to look out for

A disposition fee isn’t the only charge you could expect to face as you’re leasing a car. Look out for other fees like:

  • Excessive mileage charge: Your lease agreement includes how many miles per year you’re allotted. If you go over that amount, you’ll get hit with an excessive mileage charge.
  • Wear-and-tear charge: If your car has some major dings and scratches, you could face a wear-and-tear charge based on the cost of the repairs.
  • Early termination charge: Your agreement outlines how many months your lease is for. If you want to end your lease early, you could face an early termination charge.
  • Purchase option charge: When your lease is up, you have the option to buy your car. Sometimes you’re required to pay a purchase option charge if you’d like to buy your car. Depending on your contract, this fee might be rolled into your new auto agreement, but you’ll need to see if buying your car and paying this charge is worth it instead of getting a new car.

Not all fees are charged or required with a lease agreement. It’s important to review your contract and ask any questions before signing it.

Tips for leasing your next car

Before you head to the dealership to find your dream car, ask yourself these questions.

What can you afford?

Don’t trick yourself into thinking that you can afford more than you actually can. Review your budget and determine what a reasonable payment is. Give yourself a window, and if there’s any way to pay off other debt before taking on a new lease, do it. For instance, consider paying off your student loans or finding a cheaper cellphone plan to make room for a possibly higher car payment.

If you’re having trouble determining how a car may fit into your budget, use an auto lease calculator to see what you can afford.

What cars fit into your budget?

Not every car is priced the same. Once you’ve figured out what you can afford, find cars that fit that budget. It’s OK to have a list of preferences, but avoid settling on only one car. You don’t want to get your hopes up and, in a stressful moment, settle for something that’s more expensive than you can afford.

What’s your down payment like?

Leasing a car is different from buying a car; if something happens to your car during your lease, your insurance company pays the leasing company the value of the car, not you. This means that the chunk of cash you put down at the beginning of your lease is lost.

You’ll typically only need $2,000 or less in upfront costs for a leased vehicle. Consider putting no cash down and rolling all of the fees and costs into your monthly agreement, as long as you can afford those monthly payments.

If you’re getting rid of your old car, ask about its trade-in value. If the car is worth about $2,000 or less, it’s probably fine to use that as your down payment and lower your monthly payment. If it’s worth more, you may want to sell it on your own and save the extra cash for other expenses, like paying off debt or building up your savings.

What’s your commute like?

The more you drive, the more miles you’ll need to account for. Leasing agreements tend to have set limits, like 10,000, 12,000 and 15,000 annual miles. If you set your mileage at 10,000 a year and end up going over, you can expect to pay an excessive mileage charge, usually around $0.30 per mile. So if you set your mileage at 10,000 and go to 12,000, that extra 2,000 miles will cost you $600 at the end of your lease in excessive mileage fees. That’s not including other charges.

It’s a good idea to understand your commute and driving habits before you settle on a car. That way you can choose the option that best fits your needs.

Where can you get the best rate?

Don’t be loyal to a car dealership, be loyal to your bank account. Compare rates from many different options, including many car dealerships and what’s available at each one. This is why it’s good to have a variety of car choices in mind. When you can find the best rate, it might come down to choosing a car that wasn’t at the top of your list.

Your interest rate is based on your credit score and history. The higher your credit score, the lower your interest rate. If you have a co-signer with great credit, you could get a lower interest rate — and a lower overall monthly payment — compared to a deal without a co-signer.

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Written by
Dori Zinn
Contributing writer
Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy.
Edited by
Student loans editor