What Is an Auto Lease Disposition Fee, and Can You Avoid It?

When your auto lease is over, you just drop off the vehicle and walk away, right? Not exactly. With most auto leases, you’ll almost always owe a disposition fee (or turn-in fee), even if you return it in showroom condition. There are, however, a few ways you might get the fee waived.

Related: How Does the Inventory Shortage Impact Leasing?

Leasing companies charge disposition fees — generally a few hundred dollars — to pay for prepping the vehicle to sell or send off to auction. It’s just one of the end-of-lease charges you might owe, along with potential charges for excess wear-and-tear or excess mileage, but it stands out because it’s simply for the privilege of giving the vehicle back. You can find what you’ll owe in your lease agreement listed among end-of-lease charges; the Federal Reserve’s Regulation M requires disclosure of lease costs.

Can You Get Out of It?

No — at least not if you just want to return the vehicle. If your signed lease agreement includes a disposition fee, you’re stuck with it, and it likely will be deducted from any lease security deposit you paid or in cash if you did not have to make a deposit.

You might not have focused on that end-of-lease disposition fee while you were in the middle of negotiating the vehicle price and other upfront terms. Even if you did see it, it’s not one of the things you could have negotiated. “The disposition fee is set by the lender, and it cannot be negotiated down at the initial signing. The dealer has no say in this matter,” says Michael Sin, co-founder of leasing information site Leasehackr.

You Might Be Able to Avoid It 

There are a few ways in which you might be able to avoid the fee — or at least lessen the sting — if you plan before you sign a lease or if you need another vehicle at the end of your lease.

Pick a Brand With No Fee or a Lower Fee

There aren’t many, but a few automakers’ captive lenders (the finance arms that write the bulk of leases) and some third-party companies impose no disposition fee. Even among those that do, some are much higher than others. Sin’s site maintains a Leasehackr Calculator to compare captive lenders’ lease terms by auto brand, including disposition fees. As of this writing, the site shows Acura and Honda (Honda Financial Services) and Mitsubishi (which leases through Ally Financial) have no disposition fees. Among those that do, Subaru Motors Finance, for example, charges $300, while Mercedes-Benz Financial Services sets the fee at $595.

Buy Your Leased Car

If your lease has a purchase option, you can choose to buy the vehicle at the end of the lease for the purchase price — or residual value — set in the contract, though that option also might have a fee. “If you buy the car at lease-end, you’ll typically pay a lower ‘purchase option’ fee, as set forth in the lease contract, instead of a disposition fee,” says Sin.

This could make sense in today’s red-hot used-car market, even if you don’t want the car and will just turn around and sell it. That’s because the residual value written into your lease two or three years ago likely understates its current resale value. Before you return a leased vehicle, you should research its current value versus the residual value. You could benefit from any gain in value by keeping the vehicle or trading it in for a new one rather than letting the leasing company have it. “A lessee could be forfeiting hundreds, if not thousands, of dollars in equity if they simply return the lease,” says Sin. You can read more from Cars.com on this option here.

Buy or Lease Again From the Same Brand or Dealer

You might give up some of your equity but generally can have the disposition fee waived if you take the easier route of replacing your leased vehicle with one from the same auto brand, company or dealer. “Most brands will waive the disposition fee if you lease another vehicle from them — but that’s not written on the lease contract itself,” says Sin.

The new car might not even need to be the same brand to get the loyalty waiver. Some captive lenders, such as GM Financial, will waive the fee if you buy or lease a new vehicle from any of GM’s brands. Even with a third-party lease, if you return the vehicle to the same dealer and buy or lease another of their cars, the dealer might cover the fee to make the sale.

More From Cars.com:

• Should You Buy or Lease Your Next New Car?
• When Will Used-Car Prices Drop? 3 Things Car Shoppers Should Know
• Is Now the Time to Buy Out Your Car Lease?
• How Do I Calculate if a Lease Is a Good Deal?
• Glossary of Car Leasing Terms

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