What Happens to Your Deposit at the End of a Lease on an Auto?

Having paid a pretty penny to lease a vehicle, the last thing you want to do is pay more when you turn it in. Unfortunately, that's exactly what happens to many unsuspecting lessees. Your deposit, typically equal to one monthly lease payment or more, can be returned to you if you've played your cards right. If not, you could end up owing even more.

A lease deposit is like any other security deposit. It protects the lessor if the vehicle is not returned in accordance with the terms specified in the lease contract. Because you're not in a good position to negotiate charges at the end of your lease, getting the best terms possible can only happen before you sign on the dotted line. Costs at the termination of your lease generally fall into three categories: cosmetic damage, mechanical damage and excess mileage. The dealer can deduct charges in any of these areas from your security deposit.

One of the contested aspects of leasing is determining what is normal versus excessive wear and tear. When you lease a vehicle for two, three, even four years, it would be unreasonable to expect that you would return it in the same condition you received it. However, if the car has excessive dents, a cracked windshield or other damage, including balding tires, you will be responsible for the fixes. If the security deposit is insufficient to cover the costs, you must come up with the difference. You'll have the option to make any necessary repairs on your own or to have the dealer take care of them. Either way, it'll cost you.

Along those same lines, you're required to perform all scheduled maintenance on the vehicle throughout the term of the lease. If, for instance, the vehicle were to develop an engine problem that could be attributed to not having the oil changed regularly, the dealer can hold you responsible for the repair. That's why it makes sense to complete all required maintenance in accordance with the schedule laid out in the owner's manual and to keep all the receipts. Needless to say, it's in your best interest to treat a lease vehicle the way you would treat your own.

The third relevant factor is mileage. Your lease payment is based in part on the number of miles you agree to drive, on average, in a year. Lessees tend to focus on minimizing their monthly payment by accepting a low mileage limit. However, if you rack up miles in excess of what you agree to, the dealer will charge you a per mile penalty as stipulated in the lease contract. Shorting yourself on mileage to reduce your monthly outlay will likely end up costing you more in the long run.