Disposition fee: what it is and when you can avoid it
A disposition fee is a flat charge your leasing company bills when you return the car at the end of the lease, to cover inspecting, reconditioning and reselling it. The amount is fixed in your contract, listed with the other charges that are not part of your monthly payment.
Do you pay the disposition fee?
It is the charge for returning the car. Buy it or sell it, and it generally goes away.
Unless a waiver covers you. It arrives on the final lease-end invoice with any mileage and damage charges.
The lender is not taking the car back. Some contracts charge a purchase option fee instead.
As a trade-in or a sale. Ask the dealer to confirm that nothing is added for it.
Through the lender, the fee is usually part of the early termination bill.
The new lessee takes over the contract, including the disposition fee at its end.
A flat charge. The amount is fixed in your contract, listed with the other charges that are not part of your monthly payment.
Key takeaways
You generally do not pay a disposition fee if you buy the car or a dealer buys it from the lender, and many carmakers' finance companies waive it when you lease or buy another car from them within a set time after the return.
When the disposition fee applies, and when it doesn't
You return the car at the end of the lease: the fee applies unless a waiver covers you. It arrives on the final lease-end invoice with any mileage and damage charges.
You buy the car: no disposition fee, because the lender is not taking the car back. Some contracts charge a purchase option fee instead; see lease buyout.
A dealer buys the car from your lender as a trade-in or a sale: the lender sells the car rather than taking it back, so the fee does not normally apply. Ask the dealer to confirm that nothing is added for it.
You end the lease early through the lender: the fee is usually part of the early termination bill. In California, termination charges on a personal lease, whatever they are called, cannot add up to more than a reasonable disposition fee disclosed in the contract.
You transfer the lease: the new lessee takes over the contract, including the disposition fee at its end.
Where to find the disposition fee in your contract
Federal leasing rules require the lessor to disclose, by type and amount, the charges you will owe that are not part of the monthly payment, and the official interpretation of those rules names disposition charges as one of them. In practice, look in the federal disclosure box near the top of your contract, in the section for other charges that are not part of your monthly payment. Your lender's lease-end letter or online account usually repeats the amount before maturity.
If the fee varies by where you return the car, the contract has to show the highest amount, and it may explain the lower ones.
How to get the disposition fee waived
Stay with the brand. The most common waiver: return the car and lease or finance a new one through the same carmaker's finance company within a stated window. The window and the qualifying vehicles differ by lender, so ask for the rule in writing before you shop elsewhere.
Buy the car or let a dealer buy it. Either one avoids the fee entirely, and a sale can also capture any lease equity.
Ask for it in the next deal. If you are leasing again with the same brand but the waiver does not apply, ask the dealer to cover the fee as part of the new deal, and get that promise written into the paperwork.
Negotiate it before you sign, not at the end. Once the contract is signed, the fee is a contract term. If it matters to you, raise it when you are choosing the lease, along with the other lease fees.
How to get it waived
Ways to avoid the disposition fee.
Stay with the brand
The most common waiver. Return the car, then lease or finance a new one with the same carmaker's lender.
Watch forThe time window and qualifying vehicles differ by lender. Ask in writing.
Buy it or sell it
Buy the car or let a dealer buy it. Either one avoids the fee entirely.
AlsoA sale can also capture any lease equity
Ask in the next deal
Leasing again with the same brand but the waiver does not apply? Ask the dealer to cover the fee.
Watch forGet that promise written into the paperwork
Ask before you sign
Once the contract is signed, the fee is a contract term. Raise it when you are choosing the lease.
Best whenYou are choosing your next lease
Disposition fee vs other lease-end charges
Disposition fee: flat, set in the contract, charged when you return the car.
Excess mileage charge: per mile over your allowance; see lease mileage overage.
Excess wear and use charges: for damage beyond the lender's standards; see excess wear and tear.
Purchase option fee: charged by some contracts only when you buy the car.
Acquisition fee: charged at the start of the lease, not the end.
Disposition fee rules in California
On an early termination of a personal lease, California limits the total of termination-related charges to a reasonable disposition fee disclosed in the contract, on top of the other items the law allows.
On a lease-end bill, California sales tax applies to excess wear, excess mileage and late-return charges. Ask your lender whether it adds tax to the disposition fee on your invoice.
Before you sign your next lease, find the disposition fee on the quote and in the contract; see how to read a lease quote.
What to ask
What disposition fee does my contract list, and does it change with where I return the car?
What exactly qualifies for a waiver: which vehicles, lease or finance, and within how many days?
If a dealer buys the car from you, will any fee appear on my account?
Will sales tax be added to the fee on my final bill?
How 021 helps
When your next car comes through 021, we can take care of the current lease as well. Most often a dealer in our network takes it in trade and any equity can go toward the next car, and we can also handle the return, a buyout or a lease transfer.
When you shop your next lease through 021 Auto Leasing, several dealers quote the same car, and you get one written quote with the payment, drive-off, term, miles, taxes, fees and 021's fee before you agree to anything. Nothing is hidden, and one specialist handles the sourcing, negotiation, paperwork and delivery.
Before you decide
Four questions to ask.
The amount is in your contract. The waiver rule and the final bill are worth confirming first.
- What disposition fee does my contract list?And does it change with where I return the car?
- What exactly qualifies for a waiver?Which vehicles, lease or finance, and within how many days.
- If a dealer buys the car, will any fee appear?Check your final lender statement to make sure no fee was added.
- Will sales tax be added to the fee?Ask your lender whether it adds tax to the disposition fee on your invoice.
Common questions
What is a disposition fee on a lease?
Can the disposition fee be waived?
Is the disposition fee negotiable?
Do you pay a disposition fee if you buy the car?
Do I pay the disposition fee if I trade in my lease?
021 Auto Leasing is a licensed California autobroker (license #82402). All new cars arranged for sale are subject to price and availability from the selling franchised new car dealer.