Disposition Fee

Definition

A disposition fee is a charge that a dealer may impose when a leased vehicle is returned at the end of the lease term. This fee covers the costs associated with cleaning, inspecting, and preparing the vehicle for resale. It’s important to note that this fee can vary significantly among dealers and is often negotiable.

5 Must Know Facts For Your Next Test

1. Disposition fees are usually outlined in the lease agreement, so it's essential to read this document carefully before signing.
2. These fees can range from a few hundred dollars to over a thousand, depending on the vehicle's make, model, and dealer policies.
3. Not all leasing companies charge a disposition fee; some may waive it as part of their customer service or promotional offers.
4. Negotiating the disposition fee is possible, especially if you have been a loyal customer or if there are competing offers available.
5. If you decide to purchase the vehicle at the end of the lease instead of returning it, you typically won’t have to pay the disposition fee.

Review Questions

• How does understanding the disposition fee help in budgeting for the total cost of leasing a vehicle?
  • Knowing about the disposition fee allows you to budget more accurately for the total cost associated with leasing. This fee can add several hundred dollars to your expenses at the end of the lease term. By factoring in this potential cost upfront, you can make better financial decisions regarding which vehicle to lease and how much you're willing to spend overall.
• What are some strategies for negotiating a lower disposition fee when returning a leased vehicle?
  • To negotiate a lower disposition fee, start by researching what other dealers charge for similar vehicles. Bring this information to your discussion with the dealer. If you've maintained your vehicle well or if it's in excellent condition, use that as leverage during negotiations. Additionally, being a repeat customer or expressing interest in leasing another vehicle from the same dealer may encourage them to waive or reduce the fee as an incentive.
• Evaluate how the disposition fee impacts consumer behavior in leasing versus buying vehicles.
  • The disposition fee can significantly influence consumer behavior by making leasing appear less attractive compared to buying. Potential lessees may weigh this additional cost against their options and decide that purchasing a vehicle, despite higher monthly payments, could be more cost-effective in the long run. Understanding this fee helps consumers make informed choices, potentially leading them to seek out leases with no fees or exploring financing options that align better with their financial goals.

Related terms

Lease-End Fees: Charges incurred at the end of a car lease, which may include the disposition fee, excess wear-and-tear fees, and mileage overage charges.

Residual Value: The estimated value of a leased vehicle at the end of the lease term, which impacts monthly payments and potential charges.

Acquisition Fee: A fee charged by the leasing company at the beginning of a lease, covering administrative costs associated with setting up the lease.