As leasing has become more popular, consumers have increasingly realized the extra costs that come with it. When you turn in your vehicle at the end of your car lease, you’ll be faced with a variety of charges and fees. Some of these fees may be negotiable, as long as you’re equipped with some information.
What Is a Car Lease?
Traditionally, if you were in the market for a vehicle, you had two choices: buy used or buy new. But today’s shoppers have a new option. Through a dealership or other company, you can rent a car for a fixed term, which is known as leasing.
With a leased car, you pay a predetermined monthly fee for a period of either months or years. At the end of the term, you drive the car back to the leasing provider and sign paperwork to turn it in. But, in most cases, you’ll owe a little extra money.
Read More: How to Lease a Car for a Month
Lease Discharge Costs
Your leasing contract outlines exactly what happens at end of the lease, including the car's condition and mileage when you turn it in. After you’ve checked in, the leasing company conducts a vehicle inspection and finalizes the paperwork.
Whether you choose to end the lease, purchase the vehicle or lease another one, you may be faced with some or all of the following fees:
- Disposition fee: With a lease, you don’t pay a down payment when you get started. Instead, you’re typically charged hundreds of dollars at the very end of your lease for a disposition fee. The disposition fee covers the leasing company’s cost to put the vehicle back in service after you’ve driven it for a while.
- Excessive wear: It’s understood that you’ll have “normal wear and tear” while driving a vehicle for a while. But if this wear is deemed to be “excessive,” the leasing company may charge you for it. This will, of course, be subjective, but if the tires are abnormally worn or your passengers have torn one of the seats, you may find yourself footing the bill for it.
- Mileage overages: Your lease should clearly outline how many miles you’re allowed. Most leases let you drive 10,000 to 15,000 miles per year without mileage overage fees. If you’ve exceeded that when you return the car, you’re charged by the mile at the rate stipulated in your contract.
- Early termination fee: If you end your lease early, you’ll almost certainly be charged an early termination penalty. This fee can be in the thousands of dollars, so it’s important to consider it before signing the lease. If the amount isn’t listed in your contract, and you’re well into your lease term, you can request a termination fee amount by calling the leasing company.
Disputing End-of-Lease Charges
Just because you signed a lease agreement, don’t assume you can’t dispute end-of-lease charges. First, there’s the excess-wear-and-tear provision. The lease return inspection should have been conducted by an independent company, but even then, you can request a separate inspection to determine if the findings were accurate.
Another fee you see when you turn in your vehicle is the disposition fee. This is typically taken out of the deposit you paid when you signed the lease, and in most cases, it’s non-negotiable. However, if you’re purchasing the vehicle or taking a new lease, you may be able to get it waived.
One of the best things you can do as you’re approaching the end of your car lease is to take it to your favorite mechanic for a pre-inspection. Let your mechanic know why you’re there and have all damage logged, along with an estimate for fixing the items. You can then take that report with you when you return your vehicle to help dispute any damage charges.
Lease Purchase Fees
When you reach the end of your lease contract, you have three options: turn in the car, take a new lease or buy the car you’ve been driving. A lease purchase puts you in a great position to negotiate the fees you’d normally be charged at the end of your lease. However, buying your car comes at a price, too.
You get the best deal if you wait until the end of your lease term to purchase your vehicle. This also helps you avoid early termination fees. Your purchase price is based on what the leasing company determines is the residual value of the vehicle on the day you buy it. Compare this to the cost you’d pay to purchase the same make and model elsewhere.
Trading Car Leases
If you’ve enjoyed the leasing experience, you may want to turn in your leased vehicle and pick up another one. In this case, once you’ve reached the end of your lease term, you simply return the vehicle and sign paperwork to start a new lease. However, you may be able to get a deal on a new lease if the car has built up equity during the time you drove it.
For equity, the car needs to have a higher market value at the end of your lease than the buyout price, which you can request from your leasing company. If you have equity, you can use that amount to negotiate a discount on a new car lease. You should also have the option to cash out the equity, provided there’s some left after you’ve paid any leasing fees.
Other Lease Fees
To get the full picture of a car lease’s negotiable fees, it can help to understand the other fees that are built into your lease.
Here are some of the most common leasing fees:
- Security deposit: Some leases require a deposit to cover any damage to the vehicle while it's in your care.
- Down payment: Sometimes leases require a down payment in the thousands of dollars. Try to avoid paying this. You won’t get this money back if the car is totaled or stolen.
- First month’s payment: In addition to a down payment and security deposit, this is upfront money you pay while signing the lease.
- Acquisition fees: This is basically an administrative fee to cover the leasing company’s cost of setting up the lease. It will likely be in the hundreds of dollars. This fee can be rolled into your monthly payments.
- Taxes and licensing fees: Just like when you’re buying a vehicle, as a lessee, you’re responsible for paying all the taxes and licensing fees charged by state and local governments.
Negotiating Lease Fees
Although it’s always possible to negotiate fees with a leasing company, it's best to prepare in advance because you have the most negotiating power when you’re first discussing the lease with a dealership. Before you commit, ask for a list of all fees you’ll be charged and go through, line by line, to discuss them with the provider.
As with end-of-lease fees, the best thing you can do is research other options. If a leasing company is demanding a down payment, being able to cite competitors that don't require that is helpful. You should also be fully aware of the market value of your vehicle so you can negotiate the depreciation amount.
Reducing End-of-Lease Fees
The best thing you can do to negotiate the end-of-lease fees on your leased car is to keep those fees as low as possible. Make sure you fully understand the leasing company’s definition of normal wear and get that in writing if you can. Your return inspection will include logging any damage to the exterior, interior, tires and accessories.
Also make sure you keep a close watch on your leased vehicle’s mileage. If you know you’ll be pushing it, it’s best to mention that on the front end and possibly negotiate a high-mileage lease. If you’re nearing the limit, calculate the per-mile charge and consider whether it's better financially to purchase the vehicle when you reach the end of the term.
Negotiating the Cost of Depreciation
Many of your costs are related to the depreciation of the vehicle you’re leasing. A leasing company wants to know how much the car will drop in value from the time you drive it away to the time you bring it back. Needless to say, if you can negotiate the value of the car before you sign the lease, you’ll save money.
At the end of the lease, the leasing company compares the value of the vehicle to what you paid over the course of the lease. Before you take the car back, research the market value of the car. This puts you in a position to dispute the value the leasing company puts on the car, potentially giving you some leverage.
Alternatives to Inspection Costs
Any car endures a certain amount of wear during daily use. Your lease agreement probably allows for smaller dents and scratches, as well as wear on your tires. But in many cases, you’re better off having damage repaired on your own than waiting for the inspector to note it. At the very least, you’ll be able to shop around to find the best rate on the repairs.
The same goes for damages due to accidents. Your car insurance should cover repairs to your vehicle, just as it would if you purchased your car. If you wait until the end of your lease to deal with the damage, you’ll end up paying out of pocket to repair it.
But even if you’ve skipped these steps, a third-party repair shop can help. You have the right to have a separate inspection of any reported damage and have it repaired. However, if you opt for this route, don’t want wait until the last day of your lease. You’ll be penalized for turning your vehicle in late if you need extra time to have it repaired elsewhere.
Finalizing Your Lease
Once you’ve returned the car and approved any charges, it’s important to make sure you get a signed release. Make sure your name is completely removed from the car now that your lease term has ended. This protects you from claims that damage appearing after your lease term is your responsibility.
Once your lease return is complete, you should be eligible for a return of any security deposit you paid. Check the laws in your state, but in many cases, the leasing company is required to return the deposit to you within 30 days. You may have to monitor this and contact the leasing provider if you don’t see the funds in your account within at least 20 days.
Read More: Returning a Leased Car Before the Lease Ends
When you return a leased vehicle, you’ll inevitably be hit with fees. Although some of these fees are non-negotiable, there may be some wiggle room with many of them. Doing some research in advance gives you the information necessary to negotiate lower costs at the end of your lease.
- Credit Karma: What Is Car Leasing?
- Edmunds: How to Return a Car at the End of a Lease
- Credit Karma: How to Get a High-Mileage Lease
- Credit Karma: How Can I Get Out of a Lease Early?
- Credit Karma: What Is a Disposition Fee?
- Bankrate: 5 Steps for Buying Your Leased Car the Smart Way
- TrueCar: Here’s How to Trade in Your Lease
- Real Car Tips: Fees You Will Have to Pay When Leasing a Car
- Ally: Inspection Report Detail
- Veeto: What to Do When the Dealer Hits You With an "Excessive Wear and Tear" Bill at the End of Your Auto Lease?
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Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.