What is the disposition fee at the end of a vehicle lease?

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This is part of a series breaking down all the terms you need to know if you’re buying a new or used car from a dealership. Check out the rest of the series at our Car Buyer’s Glossary.

Your lease is over, and you’re back at the dealer to return your car. You know that it’s in good condition and you haven’t exceeded your mileage limits. But now you’re asked to pay $3-400 for something called a disposition fee. What the heck is that?

Great question. What is it? And why should I pay it?

You might not have to. But first, here’s what’s going on. The disposition fee is a flat fee charged at the end of the lease. It’s intended to cover the costs of reconditioning the car (fixing dings, dents, cleaning the car, etc) so the dealer can sell it as a used vehicle. Even if your car is immaculate, there are some costs associated with getting it ready to sell. So it makes sense that the dealer wants some compensation to cover that time and energy. It’s almost unavoidable.

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, the dealer doesn’t need to do any work to get the car ready for sale. They can and should waive the fee.

The other way is to take out another lease from the same dealership. Again, no need for the dealer to prep the car, so no charge is required. The dealer is making money off you leasing the car, so keeping you as a continuing lease customer is in their best interest.

That seems straightforward enough. Anything else I need to worry about?

If you’re concerned about end-of-lease fees, make sure you really understand the mileage and excess wear parts of your lease agreement. Read it carefully. These fees can add up! But if you’re walking away from your lease, the disposition fee is just part of doing business.

Is there anything I can do to avoid dropping a few hundred dollars at the end of my lease?

The disposition fee isn’t usually negotiable, but you can ask. You can also roll it into the capitalized cost of the vehicle, raising your monthly payment a little bit but spreading the pain out. You’ll pay interest on the fees you’ve rolled in, but it won’t be significant … we’re talking an extra $11 or so dollars a month. If you don’t plan on buying the car or getting a new lease, and you know that up front, rolling the fees into the lease might work for you.

Thanks!

You bet.

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