In 2021, one in four cars in the USA were leased (according to Statista). There are several reasons and excellent benefits to leasing rather than buying a car but any decision also needs to take into account what happens when you want or need to change the vehicle.
When you own the car, it is a simple matter of selling it, either online, privately, or in part exchange for a new vehicle with a dealership.
If you lease a car, the decision is more involved because you have to revisit the issue of whether it is better to take out a new lease or switch to buying a new car.
Also, when the lease term ends, there could be costs that are irrelevant in the selling process.
What are End of Car Lease Fees?
There are 5 main fees a leasing company may look to charge you at the end of a lease term.
- Disposition Fee - also known as the turn-in fee, this is essentially a pimped-up admin charge to cover the costs of the leasing company cleaning up and repurposing your returned car.
- Excess Mileage Fee - charged if you drive more miles than as specified in your lease contract.
- Early Termination Charge - a penalty that is levied if you return your car before the lease term ends.
- Purchase Option Charge - not charged by all dealerships, but a potential charge if you decide to buy the car and the lease-end.
- Wear and Tear Charge - the amount to be paid will be based on the level of damage and the cost of the repairs as assessed at the wear and tear inspection.
When you enter a car lease agreement, you are not the car’s owner. Effectively you are only a caretaker. As a caretaker you are expected to look after the car - probably be more considerate than if it were your own vehicle.
Saving on Lease Returns Fees
How to make savings at the end of your lease will depend on the decision you make whether you return the car or buy the car. The following tips will not only help you save money at the end of the lease but will also inform your decision as to what you do for your next car.
#1. Sell Your Lease
If your pre-inspection has identified a whole raft of charges that have left you breathless, consider selling your car. You need to find a buyer that specializes in buying leased cars.
The first step is to get your car appraised.
Obviously, the appraised value may not be so great and if it is more effective and cheaper to pay the lease-end fees, then that is the most sensible way to go.
If the appraisal amount is more than or close to the lease buyout value, selling your car is the easiest way to get rid of your obligation to the lease and also circumvent the lease-end charges including the disposition fees and wear and tear charges.
Selling your car to IMX Auto Buying Center can not only save you money but can also make you money. IMX has an exceptional track record in buying leased cars that no other company is able to.
#2. Saving on the Disposition Fee
There are three ways to avoid the disposition fee:
- Check the contract before you sign - Ensure you know the conditions of the lease turn-in before you sign your lease contract. Know exactly what the disposition fee is. Some companies don’t charge a disposition fee or you may be able to negotiate a waiver with the leasing company but as it will form part of the terms and conditions of your lease agreement, it must be agreed upon before you sign anything.
- Sign another lease - If your intention is to lease another car rather than purchase your own vehicle, your current dealership may waive the disposition fee. If it isn’t automatic, you have a position from which to negotiate. Do your research before deciding to go to a different dealer. You may be able to find a car with a lower monthly payment but factor in the saving of the disposition fee. You may find it is cheaper to stay with the same dealer and leasing company than to change.
- Purchase your leased car - if there is a purchase option written into your lease agreement, there may be an automatic waiver of the disposition fee because the company doesn’t have to expend any cost or effort to prepare the car for a new owner/lessee. If not, again, it is a case of negotiation.
#3. Do Not - Ever - Exceed Your Annual Mileage Limit
Most leasing companies offer a range of mileage allowances. Your mileage allowance is set and written into your lease contract. It is important to make a really good estimate of how many miles you think you will do annually - err on the cautious and overestimate.
If you exceed your annual mileage limit, the charge could be anything from 15 to 25 cents per mile and may rise to even more in the near future given the current climate around fossil fuels and market pressures.
If you think you may exceed your limit, talk to your leasing company, they may enable a change to a bigger allowance - at a cost of course.
#4. Get a Lease-End Pre-Inspection
The biggest surprise to most leased car drivers when the current lease comes to an end is the amount the dealership claims for the Wear and Tear Charge. The $300-$500 disposition fee can pale into insignificance if you haven’t looked after the car well.
What you might consider being reasonable wear and tear may not be in line with the dealership. Anything that affects the aesthetic of a vehicle - interior and exterior - can reduce a car’s appeal to the next lessee or buyer, ultimately affecting the market value or lease payments the dealer may be able to get.
Sure, those little dings and dents you got from the store car park bollards are pretty small, but they will be picked up on. As will that cigarette burn in the upholstery.
Check your contract before panicking about any damage. Every leasing company has to allow for reasonable wear and tear but each will have its own interpretation of what normal wear and excess wear is reasonable. Most commonly, damage falling within the “credit card test” is not charged for: i.e. any damage that can be covered up by a credit card.
A lease-end pre-inspection will provide you with an estimate of what you could be expected to be asked to pay when you turn in the lease.
Always use a third party to carry out the pre-inspection - a company not associated with the dealership or leasing company.
#5. Repair Major and Obvious Damage Before Returning the Vehicle
There are three obvious areas that are best tackled by yourself before the lease ends that will save on termination fees.
Tires should be rotated regularly to balance wear and tear. Remember, the minimum legal tire tread in most states is 1.6 mm (2/32 inch). You will probably not be charged if you return your leased vehicle with at least 1/8 inch of remaining tread. If your tread is less than this or is bald, it is best to replace them. You can probably find replacement tires cheaper online than your dealership will charge on lease termination.
Glass covers items like windscreen, headlights, and taillights. The dealership may overlook scuffed head and taillight covers but they won’t forgive a cracked windscreen. If you’ve been sensible with your auto insurance, you’ll have a $100 deductible for a replacement windscreen. Paying this deductible is going to be cheaper than being charged a replacement fee by your dealership.
Bumpers can be costly to repair, particularly if they have become dislodged. Again, you can save money on wear and tear charges by getting it fixed before the handover inspection.
Check your contract for other things that are likely to be charged for if they are damaged or not working. Typically, this includes things like radios, navigation systems, window regulators, and spare keys. Again, getting them repaired is probably the cheaper option.
#6. Don’t Lose Anything
It is one of the most common recharges for leased vehicles. Lessees remove items from the car and then lose them. This can be anything from spare wheel covers, removable headrests and luggage compartment covers to the third row of seats for SUVs. Put anything you remove from the car somewhere safe.
#7. Stick to Scheduled Maintenance Guidelines
Just because you aren’t technically the car’s owner doesn’t mean you can ignore scheduled general maintenance. If your lease is for a new car and a term of 36 months, the vehicle warranty should cover the cost of repairs.
The best way to approach this is to keep a written record of scheduled and non-scheduled maintenance. This will prove that you have looked after all the areas of concern. Records should detail oil changes, tire rotations, and fluid level checks. If the inspection reveals engine trouble or mechanical problems, your maintenance records will make it hard for the dealer to claim you were at fault.
#8. Get Wear and Tear Insurance
If you know that in all likelihood you will be stung for wear and tear costs at the end of your lease contract, consider wear and tear insurance. You might be an accident-prone driver or have a sloppy messy family! Some leasing companies have their own wear and tear coverage for damage or your dealership may offer a policy from an independent insurer. As with everything, know exactly what you are covered for and how much you will be paying.