If you’re turning in your vehicle well before the lease ends, there is usually an early termination fee that will include a penalty along with covering the unpaid lease payments. If the end of the lease is less than six months out, depending on the dealer, you can avoid the early termination fees but not remaining payments.
For those wishing to purchase a vehicle, dealers will often add a purchase option charge to any closing costs as part of the lease’s cost. However, many dealers will waive this cost if you finance with them. All taxes and fees are also your responsibility. These charges are often in the range of $100 to $200.
If you are not buying the vehicle, a disposition charge (around $350 in most cases) is added to the lease termination costs plus any unpaid lease payments. This fee pays the dealer to put the vehicle back into the inventory. The only way to sidestep the fee is to lease another vehicle (or you can extend the lease on the same vehicle again), but the same lease termination fees noted above will again apply at the end of that lease. There is no free lunch here.
In certain circumstances, the dealer will extend the lease a few months if you officially request it. Since many parts of our country are dealing with the coronavirus lockdown, some dealers are closed or only open for service. For that reason, if you have an impending lease end date, you can request extensions by calling your vehicle manufacturer’s finance group. The phone number to call should be on the paperwork you signed when leasing the vehicle. Note that this does not automatically add to the mileage cap on your vehicle so while you are asking for additional months on the lease, tell them where you are on miles. They could cut you a break on miles too.
Two key factors determine your final lease termination fees: where you are on the pre-determined vehicle annual mileage cap and whether or not there is excessive wear/damage to the vehicle. The annual mileage cap is the number of miles you promised the dealer you would not go over annually at the lease signing. The cost for exceeding the mileage cap is usually in the 15 cents per mile for vehicles with an MSRP less than $30,000 or 20 to 25 cents per mile on higher MSRP vehicles.
These penalties can add up quickly. If you’re over the mileage cap this time, in the future you may want to increase the annual mileage allowance on your next lease. Raising this allowance will see the monthly payment increase slightly. But it’s better than incurring a big penalty fee at lease termination.
If you think of a lease as a vehicle rental, you will have a better understanding of how dealers think about your vehicle. As with any rental, excessive wear or damage results in charges. Upon simple termination of the lease, dealers generally require a vehicle inspection. If you’re buying the vehicle, no inspection is necessary. Dealers will do the inspection either at the dealership or in many cases, they will come to a place you designate.
Along with showing up for an inspection with a clean car (obviously), there are a couple of things you can do to help make your vehicle look as if you took good care of it, something dealers always appreciate. Make sure all fluid levels are within the allowable range because poor maintenance of these basics could give the appearance you neglected your vehicle. Also, make sure tire pressures are set to manufacturer standards. If you’re behind on any maintenance schedules, it might be a good time to catch up and get that oil change or cabin air filter replacement handled. These things simply make you look better in the eyes of that inspector and maybe overlook a few of your indiscretions.
Each car manufacturer sets guidelines for what is acceptable wear. Items such as dented fenders, cracked windshields, and bald tires will cost you in the end. But some things are in the acceptable range with some dealers waiving the first $500 of “wear.“ For example, the Honda Wear and Tear guidelines allow for up to 15 stone chips in the hood or front bumper. Also, minor dents that don’t break the paint or chips in the windshield that are smaller than one centimeter are acceptable. Concerning wheels and tires, most manufacturers allow for minor scuffs or nicks to the wheels, wheel covers or hubcaps.
If you were rotating your tires on schedule, they should be all about the same level of wear all around. With no rotation, they might charge you for tires since front tires on front–wheel drive cars usually wear at a faster rate, vice versa for rear–wheel drive cars. You can check the tread depth with something as simple as a toothpick. Carefully place the toothpick in a rain groove within the tire and note the depth. If it is less than 3 mm, dealers will usually dock you at lease termination.
The time to prepare for lease turn–in is every day you drive the vehicle. Keeping the vehicle clean with regular car washes and interior vacuuming along with removing upholstery stains when they happen will pay dividends both in the personal pride you have for your vehicle and the cost for correcting these issues later.
Learn more in KBB’s Complete Guide to Leasing.
