What Is a Lease Disposition Fee & Do I Have to Pay It?

What is a Disposition Fee?

A disposition fee is a final fee payable at the enA disposition fee is applied to the leasing of a vehicle. You see, when you are leasing a vehicle, you are effectively “renting” it from the dealership. When you return the vehicle to the dealership, they will have to spend the time and the money to prep the vehicle for resale.

A disposition fee is a final fee payable at the end of an auto lease if the vehicle is not purchased. The fee is used to cover the cost of inspecting, refurbishing, cleaning, and transporting the vehicle. This fee is listed on the leasing contract at signing, and it is due when the vehicle is returned to the dealership.

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.

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Replacement keys

Every new car comes with at least two keys. However, as time goes on, you’re bound to lose or misplace one of them, but there’s no need to worry. According to Janessian, you can buy a replacement key off of eBay and then call up a locksmith and have them cut a program to your car for you. The cost of using this method is typically a fraction of what the lease company would charge you for one.

RELATED: Can You Lease an RV?

Handing over the keys | Burak Fatsa/Getty Images
Handing over the keys | Burak Fatsa/Getty Images

Do I Have to Pay the Disposition Fee?

If you signed the lease with the disposition fee, then you will be obliged to pay it if you decide not to purchase the vehicle. Therefore, it is important that you negotiate the disposition fee before you sign the lease.

Since the disposition fee tends to be a small amount relative to the total lease cost, you may be able to negotiate that fee down.

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.

Almost?

Yes. There are a couple ways to avoid this fee. For one, you could buy the car for the residual value. Since you’re buying it right then and there, there will be no reselling costs, and the fee should be waived. The other way is to take out another lease from the same dealership, a likely but not assured way to avoid the fee. The leasing company is making money off you leasing the car, so keeping you as a continuing lease customer is in their best interest.

How much is a lease disposition fee?

A lease deposition fee generally runs several hundred dollars or more. The amount may vary depending on the vehicle type, dealer, city, state or county you leased in, or the leasing company. It’s best to refer to your lease agreement, which should disclose the amount of the disposition fee.

How to Avoid Paying Fees

To avoid paying car lease disposition fees, as well as other fees, be strategic about negotiating your lease agreement to get the best deal you can. Tips to help you do so include the following:
  • Understand leasing terminology before you begin to negotiate.
  • Ask about the cap cost (the price of the vehicle).
  • Be clear on mileage limitations and overage fees (as well as any other fees).
  • Compare interest rates and APRs (as well as potential fees) from multiple dealers.
  • Let the leasing company (the “lessor”) know if you plan to buy the car.
Armed with this knowledge, you can then negotiate the lease, including its fees, to try to reduce what you’ll need to pay. The lessor doesn’t have to say “yes” to everything you want, but negotiating with several of them will likely get you a better deal, perhaps one that is a non-disposition fee lease.If you have already signed your lease, then it’s important to make sure you understand all of the fees for which you could be liable. Then do what you can to avoid incurring them, whether it’s keeping your car clean and in good condition or making sure you don’t exceed your mileage allotment.

Is there a way to get a lease disposition fee waived?

 There are generally two ways to avoid paying a disposition fee. Two common ways are:

  1. Buying the car: you may avoid the lease disposition fee if you purchase the car at the end of your lease (if your lease includes a purchase option). If you buy the car at the end of your contract, your leasing company usually won’t charge a deposition fee, as they don’t have to prepare the car for resale. Nevertheless, your leasing company may charge a purchase option fee in connection with purchasing the car. 
  2. Leasing or buying another vehicle:  If you decide to lease or buy another vehicle of the same brand, the disposition fee under your current lease may be waived as part of a loyalty benefit that may be offered.  Or you may be able to negotiate to have the fee waived.  

Dents and scratches

Scratches and dents might seem like the toughest part when it comes to turning in your lease because your car may have received a lot of them during the time that you had it. Not to worry, as Janessian states in his video that “two-inches in the normal guideline” when it comes to the leasing company charging you for scratches and dents. If your car has of those imperfections that are less than two inches in length, then the leasing company will most likely waive it off.

However, if you do have a lot of scratches and dents that are larger than two inches, then Janessian recommends that you get the dents repaired via paintless dent removal as most of those companies will charge you less than the leasing company. And for the scratches, he recommends that you pick up a bottle of “Goo Gone” at your local auto parts store and try buffing them out yourself. Just make sure to get the one that’s compatible with automotive clear coats.

RELATED: How to Get Out of a Car Lease Early

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, including: 

  • Excessive mileage charge: If you go over the mileage you’re allotted in your lease, you’ll have to pay this penalty. 
  • Wear-and-tear charge: If your car has some major dings, scratches or stains, you could face this charge based on the cost of the repairs. 
  • Early termination charge: If you return your lease before your term expires, you could end up paying this fee. 
  • Purchase option charge: Some dealerships may charge you a fee if you decide to buy the car once your lease ends. 

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

Tips for a Smooth End-of-Lease Process

Your Final Payment

Since the last payment on your leased Subaru is due one month before the actual lease end date, it’s important that you remember to cancel any recurring payments you may have set up to avoid overpaying your lease account.

If you have chosen to return your Subaru and purchase or lease a new vehicle, there will be a payoff request submitted by the retailer to receive a complete payoff including all account credits. This option will not generate a refund of an over payment as all credits will be to include in the new contract agreement OR an end of term bill for mileage, wear and use or disposition fees. If you have chosen to return your vehicle, any over payment should not be included in a payoff quoted to the retailer AND you will receive an end of term bill for mileage, wear and use of disposition fees. If you have a credit on your account at the time of turn in, please tell the retailer you expect these funds to be returned. Make sure you contact us with your return/turn in information.

Early Termination

An early termination occurs if you return your lease 31 or more days before your scheduled maturity end date. If you choose to return your vehicle early, you may incur early termination charges. Note: if you end your lease as part of a trade-in, the dealership will buy out your lease and this is not considered an early termination.

End-of-Term Billing

Based on the terms of your lease contract, your lease-end bill may include charges for outstanding payments, taxes, excess mileage and excess wear and use. There may also be a $300 disposition fee. Please review your contract carefully so you’ll know what charges you may be billed for at the end of your lease. We will not charge you any fees when you turn in your vehicle.

Extending Your Lease

Once you’re in the final 30 days of your lease, you may request to extend your lease a maximum of five months. Federal regulations prevent a lease account from going beyond the defined extension period. If you exceed the lease extension limit, your vehicle may be repossessed, you may incur additional end-of-lease fees and your credit may be negatively impacted. Our acceptance of lease payments after the lease maturity scheduled end date does not give you the right to keep the vehicle and it does not mean that we agree to extend the lease term. If you have an approved extension on your lease you still have the same lease end options, as detailed above, at the end of your extension period. Please contact Subaru Motors Finance at 1-800-644-1941 Monday through Friday, from 9 AM to 6 PM ET to request and receive approval for an extension.

Odometer Statement

When you return your leased vehicle, you will be required to complete and sign an odometer statement. Odometer Statement (PDF) »

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