Sunday, October 13, 2013

Do I have a TURN IN/Disposition fee at the end of my vehicle lease?

If you are leasing an vehicle through a bank or a manufacturer, you most likely have a turn in or disposition fee. You may not remember when you signed your papers or the finance person conveniently forgot to tell you, but it is there. It is towards the top of your lease agreement and it is probably between 300.00 and 400.00. It ranges depending on the financial institution.There are only 2 manufacturers that I am aware of that do NOT have this fee. Honda... which is going to change as of October 16, 2013 and Ally Bank used by Chrysler and GM.
    It is very common that when customers leases are coming up, they can forget that this fee is there. When we get a new car, it is exciting and we think that it doesn't matter in that moment. This is somewhat true, but it will need to be addressed when you get to the end of the lease term. If you turn your car back into the bank or manufacturer, the bill will come! There are many things you can negotiate with the bank when you get that bill. They do not negotiate on the disposition fee!!! It is contractual. It was part of the lease when you signed it.

That being said, you can get creative. There are ways to get around this fee.

1)You can get another car through the same manufacturer. They will waive the fee and sometimes some of the damage on the car being turned in. So make sure you ask about that!

2) You can buy the car. You do not pay the turn in fee if you purchase your leased car. I am not saying that this is always the best option, but for some consumers the residual is under market value.  They would not be able to duplicate the same car in the marketplace for the purchase price ! It also is a way that you do NOT have to pay the over miles if you under estimated.This also works if you have a friend or know someone that wants to buy it. To clarify, the residual is the amount that the car can be purchased for at the end of the lease. It is in your contract and also one of the factors used in figuring out the monthly lease payment.

3) The vehicle can be traded  in and have the dealer or a wholesaler buy it. This is also a way to avoid paying over miles and damage if the value makes sense. Sometimes there is even equity that you can benefit from. Make sure you do your homework and shop the car around!  Weigh out the cost both ways. Get a second opinion if your not sure!

The next time your signing or negotiating your lease contract, ask about:
 *The purchase price of the vehicle- whether you lease or buy, the purchase price should be the same!
 *The residual at the end of the lease
* The turn in or disposition fee
If you do not trust the salesperson your working with, then find one that you do. Your gut is your best meter and it is your money.
Having been leasing and selling cars for over 19 years, I am just sharing what I think can help consumers to understand.