Deciphering the Car Lease Contract

Once you’ve chosen the car and worked with a salesperson, you’ll have lots of paperwork to read over and sign. Make a promise to yourself not to sign anything until you understand and agree to everything in it.

Chances are, there will be some items mentioned that you’re unfamiliar with. Since many of us are too afraid to ask, here’s a handy guide to many of the terms you’re likely to encounter on your lease agreement:

  •  Acquisition Fee — also called a bank fee. It’s usually between $500 and $1000 and it’s set by the lease finance company. Dealers sometimes increase this fee to get a little profit for themselves. Non-negotiable.
  • Destination Fees — the cost to have your car delivered to the dealership. This is usually $400 to $800. Non-negotiable.
  • Disposition Fees — what you may need to pay if you don’t lease another car from the dealer when your current lease ends. These are typically about $350.
  • Doc Fee — an administrative fee that commonly runs $250 to $600, most of which is profit for the dealer. Negotiable.
  • Mileage Fee — the per-mile charge at the end of your lease for excessive miles driven during the lease. Fees range from $0.15 to $0.25 per mile. Non-negotiable.
  • Net Capitalized Cost — this is the negotiated price of the car plus the acquisition fee.
  • Purchase Option Fees — an amount you will have to pay if you decide to purchase the car at the end of the lease. Negotiable.
  • Residual Value — what the car is expected to be worth at the end of the lease. This is used to determine the cost of your lease.
  • Sales Tax — charged if you make a down payment.
  • Tag, Title, License and Registration Fees — charged by state and local governments. Non-negotiable.
  • Tire Fee — a government-mandated fee. Non-negotiable.


Lease or Buy  

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