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Car Lease Disposition Fees Explained

By | Published May 16, 2016

Definition & explanation of disposition fees and how to avoid them

When buying a new car you will often find yourself inundated with many itemized fees whose descriptions defy common logic and leave you totally confused as to what you are paying for and whether the fee is a legitimate one or not. We often receive questions from our site visitors asking us "What is a disposition fee?" Here is the CarBuyingTips.com explanation of this fee which puzzles many car leasing customers.

Car Lease Disposition Fees Explained image 1

The disposition fee is what dealers charge you to dispose of the car

Let's focus on this fee, and why they charge it. You'll see it on auto leasing paperwork from car dealers, who will charge you this fee at the end of your car lease term if you don't buy the car. If you just return the car to the dealer and go off and buy or lease another vehicle, they will charge you this disposition fee.

It's on your paperwork, why didn't you notice it or ask questions?

It's amazing how many car buyers tell us they saw this fee on the paperwork when they got home but they did not notice it at the car dealer. Then they contact us to ask what it is and why it is on their paperwork. This is worrisome for us because it means that more people buying new cars are not paying attention to the fees they are being charged and are simply speed signing the paperwork to get out of the dealership with their new car.

This is what happens when you leave your brain on auto pilot, and don't pay attention to the fees that the car dealer is asking you to pay. You should be asking them line by line what each itemized charge is, and can it be removed.

Why car dealers charge you a disposition fee

When you turn in your leased vehicle at the end of the lease period, for example at the 36th month, the dealer wants to charge you a disposition fee anywhere from $250 to $350 to cover their costs of reconditioning the car for either resale on their used car lot or delivery to the wholesale auctions, where dealers take their off lease cars to be sold as-is.

Here a fee there a fee, everywhere a fee

Auto leasing is already jam packed with all sorts of confusing fees like excessive wear and tear fees, punitive mileage fees, inception fees, acquisition fees, security deposits, rental charges, cap cost reductions, it's enough to drive you crazy with all this terminology.

Most car shoppers have no idea that they are being hit with over $1,000 in fees whenever they lease a new car. Typical Acquisition Fees are $600-$800, then they tack on your $350 disposition fees and you are already heading north of $1,000, and I haven't even gotten to the price of the car or any of the other fees yet. They just fee you to death with car leasing.

Where to find the disposition fee on your vehicle lease agreement

Most decent car dealers will make your fee easy to find. It is often near the top of the paperwork in a table titled Federal Consumer Leasing Act Disclosures. They are often listed in a small cell in the table called "Other Charges." See the photo at the top of this article.

Sometimes, you won't see the fee listed in the table, it's in the fine print verbiage on the back side of your contract, see the section further below in this article about sneaky car dealers.

Other names for the Disposition fee: Turn-In Fee, Termination Fee

Car dealers like to have different names for the same line item on their paperwork. You'll find most leases will itemize the Disposition Fee, while others will refer to it as a "Turn-In Fee," and still other dealership paperwork has verbiage itemizing it as a "Termination Fee." They all mean the same thing.

The photo below shows an actual auto lease contract with the turn-in fee listed on it:

Car Lease Disposition Fees Explained image 2

Some sneaky dealers charge disposition fees without telling you

No shock there, some car leases don't itemize the disposition fee clearly on the front like you would expect. Instead, they play cash flow shell games and hide the fee in the fine print on the back of the lease paperwork, where no man has ever gone.

I keep telling people who lease new cars to look for this fee, both on the front and buried in the fine print on the back, to see if the dealer is charging you anything, and so you can ask them to remove the fee. Now is the time to ask, while you are sitting in front of them, threatening to leave without buying.

See the photo below, which we shot from an actual car lease contract, is an example of a lease where they hid the $250 fee in the fine print on the back of the paperwork, instead of properly disclosing it on the front of the paperwork.

Car Lease Disposition Fees Explained image 3

There you can see the section called End Of Lease Liability, there is verbiage that states "I agree, that if I do not purchase the vehicle, my payment liability at the end of the lease term will be the sum of a termination fee of $250, plus blah, blah, blah."

This is what makes my blood boil and it should make you angry too! They play games like this and slap you in the face at the end of the lease by not disclosing this fee to you clearly, and in a conspicuous manner on your paperwork. Just when you thought you were done giving them your money, they reach right back into your pocket 3 years later and scoop out another $250.

They must make a fortune doing this to all the car buyers passing through their car lot. What is ironic here, is on the front of your paperwork, the car salesperson itemizes all these petty little $4 battery and environmental impact fees, along with $2 tire fees, yet they leave out the weightier matters like a $250 disposition fee. This is almost comical.

How to avoid paying disposition fees on a car lease

The dealers are charging you this fee under the assumption they will have to do some reconditioning of your car prior to unloading it in an as-is sale at the wholesale auction if you choose not to purchase your vehicle at the end of the lease term.

Oh, please, let's not kid ourselves, how much effort do you really think they are going to put into a car that's on its way out the door to the auctions? Hey let's fly down some NASA engineers to make sure this car is in tip top shape before we dump it on the wholesale auctions!

Reality check: The car dealer might run it through the car wash, and their lowest paid $10 per hour grunt employee spends maybe 2 hours washing and vacuuming the car, and maybe they'll do some basic stain removal. You should argue with them that they won't have to spend anything on the car. If you have stellar credit, they know that high credit score people tend to be clean and organized aside from a few rare cases, and if they want your future business, they will put 0 or N/A in the disposition fee column and instead collect that fee from the next buyer.

Keep in mind, that when they resell off lease cars on their used car lot, they overcharge the buyers anyway; crying on their shoulder how they have to spend a fortune reconditioning the car after the previous owner dropped it off. If they want their fee bad it enough, remind them they are collecting it already from the next owner of this car, as built into the selling price.

So there you have it, everything you need to know about disposition fees. Your takeaway is to look for the fees, front and back of your paperwork! When you spot it, have them remove it, but some dealers won't remove it.

What fees did you find in your paperwork? Let us know in the comments below.

Author Jeff Ostroff

About The Author: Jeff Ostroff is a consumer advocate, Founding Editor and CEO of CarBuyingTips.com overseeing a team of expert authors. For over 17 years, he's been the recognized authority on car buying, leasing, used cars and financing. He developed sophisticated spreadsheet tools to help consumers negotiate on a level playing field. He is a widely sought out guru, cited by the press for his expertise in savvy car buying and preventing consumer scams. Jeff has been quoted in CNN, Bloomberg, MSNBC, Wall street Journal, Consumer Reports, NY Times, Reader's Digest, and many live call in radio shows. He has covered the automotive space since 1997. Jeff also has extensive experience and expertise in selling used cars for clients on eBay and Craigslist. Connect with Jeff via Email, Twitter or on Google+.

CarBuyingTips.com has affiliate referral relationships with multiple web sites. This means that for many of the links you see on this site, we are paid referral fees for leads generated from visitors that click on links or fill out forms on this site. In some cases we are paid a commission for a purchase made on a site that is linked to from CarBuyingTips.com. Please view our advertising policy page for more information.