Disposition Fee: What Is It and Do I Have to Pay It?
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If you have spent more than five minutes inside of a dealership, then you know that they love to put fees on everything. In the case of leasing a vehicle, you may have heard of a disposition fee.
So what exactly is it, when is it applied, and can you avoid paying it?
Here, we will explain everything that you need to know about a disposition fee.
Table of Contents
What is a Disposition Fee?
A disposition fee is a charge that is applied at the end of an auto lease if the lessee chooses not to purchase the vehicle. When leasing a vehicle, the lessee effectively rents it from the dealership. Upon returning the vehicle at the end of the lease term, the dealership incurs costs to inspect, refurbish, clean, and transport the vehicle in preparation for resale.
The purpose of the disposition fee is to cover these expenses. It is a predetermined fee listed in the leasing contract, and it becomes payable when the vehicle is returned to the dealership. The fee compensates the dealership for the time, effort, and resources invested in getting the vehicle ready for resale.
It's important for lessees to be aware of the disposition fee and factor it into their lease considerations. It serves as a cost associated with returning the vehicle and not purchasing it at the end of the lease term. Understanding the terms and conditions related to the disposition fee can help lessees make informed decisions regarding their leasing agreements.
How Much Is the Disposition Fee?
A disposition fee can range in price from $250 to $400. If the vehicle is a non-luxury vehicle, the disposition fee will be on the lower end of the range. If the vehicle is a luxury model, it can be at the higher end of the range. In the case of an ultra-luxury vehicle or an exotic model, the disposition fee can be significantly higher.
Disposition Fees by Manufacturer
Below is a table that shows the disposition fee for each manufacturer:
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.
Is the Disposition Fee Negotiable?
Yes. You can negotiate the disposition fee. However, you have to make sure that you negotiate this fee before you sign the lease.
If you sign the lease with the disposition fee, then you are legally required to pay the fee if you do not wish to purchase the vehicle.
How to Avoid Paying the Disposition Fee
One of the best ways to avoid paying the disposition fee is to make it a “deal-breaker” while negotiating the lease. Since the disposition fee is about a couple of hundred dollars, the dealership may be willing to “give you a break” on the price of the disposition fee or eliminate it.
However, you will want to be careful and make sure that the dealership doesn’t try to tack on fees or inflate prices somewhere else on the lease contract to make up for the lost disposition fee.
Other Car Leasing Fees
When you lease a vehicle, a dealership will add a number of fees. Some of these fees can be negotiated away while others are pretty much non-negotiable. Here’s a look at some of the typical dealership fees associated with a lease.
- Acquisition Fee. This is sometimes called a bank fee or an administrative fee. The acquisition fee is charged to arrange the leasing of the vehicle. Typically, the acquisition fee ranges from $396 to $895. The acquisition fee is usually not negotiable.
- Security Deposit. The security deposit is a fee paid to protect the dealership in case of excess wear on the vehicle. The security deposit is usually equal to or higher than the monthly lease price and can be negotiated away.
- Document Fee. The document fee includes fees associated with the tag, title, license, and registration fees. These government fees can range in price from $85 to $695. You may be able to negotiate down some of these fees.
- Advertising Fee. The advertising fee is the fee charged to advertise the vehicle. This is typically just dealership “padding” and can be easily negotiated away.
- Sales tax. In most states, you will have to pay a sales tax which is a portion of the purchase price of the vehicle. Since the sales tax is paid to the government, this fee is typically not negotiable.
Frequently Asked Questions
What is a disposition fee?
A disposition fee is a final fee that is due 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 transport of the vehicle. This fee is listed on the leasing contract at signing and it is due when the vehicle is returned to the dealership.
How much is the disposition fee?
The disposition fee can range anywhere in price from $250 to $400. Non-luxury vehicles will tend to have a lower disposition fee. Luxury vehicles will have a disposition fee at the higher end of the range. Certain exotic vehicles will have much higher disposition fees.
Do I have to pay the disposition fee?
If the disposition fee is in the lease contract at the time of signing, then you are legally obligated to pay the fee if you decide not to purchase the vehicle. However, the disposition fee is negotiable. Therefore, it is important that you negotiate the disposition fee before you sign the lease contract.
When do I have to pay the disposition fee?
The disposition fee is due at the end of the lease if you decide not to purchase the vehicle. The disposition fee will be due, in full, when you return the vehicle to the dealership.
How can I avoid paying the disposition fee?
You can avoid paying the disposition fee by negotiating out of the lease contract before you sign it. Since the disposition fee is a small amount compared to the entire cost of the lease, you may be able to eliminate it from the lease contract. You can also avoid paying the disposition fee if you decide to purchase the vehicle at the end of the lease. You can also avoid paying the disposition fee by leasing another vehicle from the dealership.
Is the disposition fee negotiable?
You should be able to negotiate the disposition fee before you sign the lease. Since the fee is not associated with any government costs such as title, tag, license, and registration, it should be easier to negotiate.
How can I negotiate down the disposition fee?
You can negotiate down or eliminate the disposition fee by saying that you don’t want to pay any “out of pocket” fees at the end of the lease. While a dealership may give you some back and forth on this disposition fee, let them know that you don’t want to pull out your checkbook when you return your vehicle to the dealership. If you are insistent, then you may be able to eliminate the disposition fee from your lease.
Do all car leases have a disposition fee?
Just about all car leases have a disposition fee. There may be some rare cases where a dealership will have a sales promotion and waive the disposition fee. It is important to carefully review the lease contract before you sign it.