What are car lease fees?

Many of the fees associated with car leasing are the same as when buying.

There are taxes, tag and title fees, dealer “doc” fees, and other official fees that are charged regardless of whether a car is leased or purchased.

However … there are some fees that are specifically associated with leasing.

Fees at beginning of lease

First, there will be an “acquisition fee” that is essentially an administrative fee to the lease company to compensate them for the paperwork and process of initiating and handling the lease. It is not a dealer fee. Acquisition fees have been increasing over the past few years and are now in the range of about $595-$795 for average vehicles. The fee can be higher for higher priced luxury vehicles.

The acquisition fee can be paid upfront in cash, or can be included in the financed part of a lease. The amount of the fee cannot be negotiated. It is set by the dealer’s lease company and cannot be modified by the dealer.

The acquisition fee is the only up-front fee that is unique to leasing.

However, there is one more up-front charge that is not a fee, as such, but is the first month’s payment. Lease payments are paid in advance, not in arrears as are loan payments. Therefore the first payment is made at the time a lease is initiated.

Sales tax can also be part of the up-front cash required in a lease, just as with a purchase. However, since (in most states) sales tax is paid with each monthly payment, not up front. Therefore, the only tax to be paid up-front is that associated with the first lease payment — and on any down payment that you choose to make.

Fees at end of lease

Another unique fee when leasing a car is at the end of the lease. It’s the “disposition fee.” It’s usually about $395 but has been increasing is recent years. It’s charged after you return your vehicle at lease-end — as an administrative fee for processing the return, the paperwork, and sending the vehicle to auction.  It is set by the lease company and is not negotiable.

Some lease companies have begun charging the disposition fee regardless of whether you return or purchase your vehicle at lease-end. It’s also charged as part of the cost of an early return.

If you exceed the mileage limit in your lease contract, or have unusual wear or damage to your vehicle when you return it, you can be charged additional fees, depending on details in your contract.

If you decide to purchase your vehicle at lease-end, you’ll pay all the fees associated with buying any used car — sales tax, tag and title fees, and possibly other official fees. You may feel that you have already paid these fees when you began your lease and shouldn’t have to pay them again. But remember, the car belonged to the lease company, not you, and the fees you paid were on behalf of that lease company. Now, when buying your vehicle, it’s a new and separate used-car purchase, not an extension of your lease.

For more details, see our article, Car Lease Fees and Taxes Explained.