Car Lease Fees to Avoid

Leasing a car might be easier than you think. If you’ve never leased a car before, here’s a quick breakdown of how to lease a car online: 

1. Research the car you want: It’s all well and good to think about driving the latest GMC or Tesla, but what car fits your current needs? 
2. Compare buying and leasing a car: Buying and leasing have pros and cons. Think about which best fits your lifestyle.  
3. Find a reliable dealer: Research customer reviews, current offers, and any discounts you may qualify for. 
4. Complete an online application: Most leasing companies and dealerships deliberate on your lease application within a day or two. 
5. Sign and return your lease documents: Make it official, but only after reading the fine print. 
6. Arrange for car insurance, including gap insurance: Be sure to ask about the minimum insurance requirements you must meet before taking possession of the car. 
7. Arrange delivery of your car: Some dealers include delivery in your lease costs, while others incorporate it as an extra fee.

Can you lease a car with bad credit? Yes, but you’ll pay more to lease a vehicle than someone with good credit. If you take the time to improve your credit score, you might find your lease that much more enjoyable. You’ll pay less to drive your lease and may qualify for a lower interest rate if you purchase your lease upon termination. 

The best car lease deals incorporate favorable terms, but what does that even mean? Here are a few lease terms you should know if you’re looking into car lease fees: 

• Lease-end pre-inspection: Many lessees choose to have a lease-end pre-inspection done before they turn in their lease. This pre-inspection aims to identify and quote out damage that can cost you twice as much (or more) if you were to have the dealer take care of it. 
• Capitalized cost: This number represents the vehicle’s selling price. 
• Lease term: This term describes how long a lease on a car is. Most leases span a few years, but specific terms vary between leasing companies and dealerships. 
• Money factor: Similar to your individual interest rate on a financed vehicle, the lessee’s credit score determines the money factor in a lease. Higher money factors translate to higher monthly (and interest) payments. 
• Capitalized cost reduction: Trade-ins, down payments, and dealer rebates lower your capitalized cost and monthly payments.
• Residual value: When generating the lease agreement, the leasing company or dealership will determine how much the leased car will be worth upon the lease termination date. This value helps determine your monthly payments. 

Anxious to know more about car lease terms? Read about how to arm yourself with this knowledge before you sign a lease agreement. 

Though there are several, one of the best questions to ask before leasing a car is, “What car lease fees can I avoid?” Knowing these fees will appear on your lease contract can help you prepare for negotiations. The following are some of the most common car lease fees you can avoid. 

1. Acquisition fee

The leasing company charges this fee to draw up your lease. Most acquisition fees are around $250, but some can go up to $1,000 or more, depending on the value of the vehicle you’re leasing. Sometimes acquisition fees are negotiable, but dealers may often roll them into your monthly payments. 

2. Car damage fees

Besides excess miles, damage fees can often cost you the most. These car damage fees can include: 

• Wear and tear: Normal wear-and-tear won’t cost you anything. However, carpet stains, rips, or tears, and any other damage done to the interior or exterior of the vehicle that’s beyond typical aging will show up on your final bill. 
• Dents and scratches: Anything larger than two inches gets picked up on your tab. 
• Tires: Leasing companies will charge you for tire replacement, mounting, and balancing. You may also have to pay for valve stems and tire pressure monitoring system (TPMS) sensors, which can be expensive. 
• Replacement keys: If you lose or damage a key fob, you must pay to repair or replace it. Depending on the brand, a new fob can cost hundreds of dollars.

It pays to care for your car, even if you’re leasing it. Avoid these costly fees, and you can potentially walk away from your lease agreement with your security deposit intact. 

3. Dealer add-ons

Once you’ve negotiated a price and sat down to sign the paperwork, many dealerships start tacking on certain fees and add-ons. These include vehicle protection plans, VIN etching, paint sealants, fabric protectants, and extended warranties. Stay informed on these fees, and don’t be afraid to refuse them. 

4. Disposition fee

Leasing companies catch you going and coming with the disposition fee. This fee pays for “disposing” of the leased car, whether cleaning it up for a spot on the lot as a used car or preparing it for auction. This fee can typically cost you a few hundred dollars, but you can avoid it if you purchase the vehicle upon the termination of the lease (if the leasing company allows lease buy-outs). 

5. Documentation fees

Leasing a car doesn’t include showing up to pick up the keys and driving off. Instead, you must pay for administrative fees such as:

• Registration
• Tags
• Title 
• License
• Gap insurance (if included)

The dealership must also collect state and local fees per regulation. While the state sets these fees, you may be able to lower your documentation fees as part of your negotiations. 

6. Down payment 

Though your down payment isn’t necessarily a “fee,” it can be an additional cost tacked onto your monthly payments. Down payments are typically optional, though lessees like to put down enough to lower their monthly payments. Remember that you’re charged sales tax on any down payments you supply. 

7. Early termination

Terminating your lease early isn’t something most leasing companies are thrilled about. The agreement you sign is binding and requires you to fulfill your financial obligations. If you terminate the lease early, you’ll pay early termination fees, equating to the remainder of the lease balance. 

8. Excess mileage

Car leasing companies are strict about their lease mileage limits, to the point of charging penalty fees if you exceed that mileage count. Penalties are charged per mile, at anywhere from $0.15 to $0.25. Some fees may go up to $0.30 on specific leases. 

Knowing how many miles you need before signing the lease agreement is essential. If you are close to your mileage count and have a few months or more left on your lease, speak with an agent to see if you can purchase more miles. Buying more miles can cost you less than paying the penalty fee. 

9. Security deposit

Some dealerships don’t require a security deposit, while others insist on it. You might be able to negotiate the security deposit, but if not, it’s typically the equivalent of the first monthly payment and is due at signing. Security deposits are refundable if there is no damage done to the vehicle. 

One of the biggest mistakes you can make when leasing a car is not figuring out how to increase your credit score to lease a car at a lower cost. If you can wait a year and improve your score, you can potentially pay hundreds less in interest because you negotiated a lower money factor. 

Here are a few other mistakes you can avoid when leasing a car: 

• Not budgeting for extra fees, like documentation fees and taxes
• Not negotiating specific pieces of the lease 
• Not shopping around to see what deals are out there
• Not paying attention to your lease mileage limits
• Not following the scheduled maintenance guidelines
• Purchasing wear-and-tear insurance (unless you’re an absolute slob)

Signing a car lease can be intimidating, and people often feel like they can’t ask questions or challenge specific fees. However, if you’re unsure about a fee or cost, speak up. Sometimes simply asking about a fee opens the discussion to negotiation. 

It’s easy to get caught up in figuring out what documents you need to lease a car. However, you shouldn’t lose sight of the lease agreement you’re signing, which can include hidden costs. The main hidden fees leasing companies and dealerships try to fold into your lease agreement include add-ons like paint sealants, protection plans, and extended warranties. 

While salespeople may not bring up these hidden costs in negotiations, that doesn’t mean you can’t refuse them once they come up in the contract you’re signing. Negotiations aren’t necessarily over until you’ve signed and agreed to the terms set out by the lease agreement. 

It’s easy to get caught up in figuring out what documents you need to lease a car. However, you shouldn’t lose sight of the lease agreement you’re signing, which can include hidden costs. The main hidden fees leasing companies and dealerships try to fold into your lease agreement include add-ons like paint sealants, protection plans, and extended warranties. 

While salespeople may not bring up these hidden costs in negotiations, that doesn’t mean you can’t refuse them once they come up in the contract you’re signing. Negotiations aren’t necessarily over until you’ve signed and agreed to the terms set out by the lease agreement. 

Like the residual value in a lease, most disposition fees are non-negotiable. However, dealerships will waive this fee if you sign up for another lease within the same car brand. For example, if you were leasing a Chevrolet, the leasing company might waive the disposition fee if you lease another car with the large bowtie on the grille.