Buying a new car can be quite the process! First, you’ve got to consider your monthly budget, for things like loan payments, insurance, maintenance fees, and gas. Then comes picking out a car you’re interested in — and fits your budget. When it’s all said and done, maybe buying a car outright isn’t the right choice for you.

Luckily, there’s the option of leasing. When you lease a car, you’re really paying a dealership to let you use the car for a few years. It’s like renting, but with a lot of caveats. And it’s those very caveats that can get you in trouble if you’re not careful.

Before you even think about leasing a car, consider all your options, from buying new to purchasing a used car at a lower price. Again, not only will you have to consider your budget, but also your lifestyle, among many other things. Some companies may even offer a lease-to-own option, so you can keep the car if you fall in love with it.

If you’re considering leasing a car, keep reading. Knowing what fees, you’ll potentially be faced with means you can prepare and be in the know, rather than in the red.

Most Common Types of Lease Fees

Here are just a few of the fees you’ll want to know about when you sit down to sign a lease. Typically, your monthly payment is based on the car’s depreciation, sales tax, interest, and how much money you put down. This is all divvied up among the duration of the lease.

Polish off those negotiating skills and the best of luck!

Excise Tax Fees

There’s really no way of getting out of this one. Like paying your taxes, you have to pay the excise taxes on your vehicle, which is determined based on the value of the car. Newer models, therefore, will have a higher excise tax than those a few years old.

Damage Fees

Any car owner could tell you that carrying around a pair of keys means you’re also taking care to protect your investment as much as you can. There are certain wear and tear processes that are natural to car ownership — and some that are definitely not.

If you’re someone who tends to hit more objects driving home than a blind drunk, leasing may not be the best option for you. You’ll end up having to pay for the damage incurred beyond “typical” use damage, which can get pricey, quick. Be sure to pin down exactly what “typical” wear and tear is before you sign any paperwork.

Mileage Fees

Almost every car owner knows that lower miles means a better car (with a few exceptions, of course). It stands to reason that if you drive less, you aren’t putting your car through as much heavy wear and tear that devalues your investment.

When you sign a lease, you’ll most likely be held to returning the car with (fewer than) a certain number of miles. That’s something you can negotiate during the process, because if you’re positive you’re going to drive further, it’s better to be up front about it than having to pay the penalty when the lease is up. Dealerships are most interested in keeping mileage low, so they can maintain the value of their investments. As long as you are all in agreement, a few more miles added on in the beginning shouldn’t be a deal-breaker.

Registration/Conveyance Fee

Owning a car means you’ve got to let local law enforcement know who it belongs to. Some dealerships will take care of the registration for you — hooray! But the time you’d have spent at the DMV could end up costing you a pretty penny if you’re not careful. Consider how much the fees would be if you went to the DMV yourself and weigh your options. Would you rather spend hours waiting in line or simply pay the fee and be on your way?

Sales Tax

This one’s similar to the excise tax fee. Like anywhere else, you’ll have to pay sales tax on the vehicle you lease.

Acquisition Fee

This is one of those instances where the dealership can charge you a fee for generating a lease. Each one will have a different reason for why they charge you but consider it one of those miscellaneous “administrative” fees.

If you can get the leasing agent to negotiate on this particular item, do so! Otherwise, it might be a futile endeavor.

Disposition Fee

This is the fee you’ll pay for terminating the lease. Yes, it’s a bit like the annoying “administrative fee” or the like you pay in other cases, but it might be something you can waive if you end up leasing the car further or leasing another model from the same dealer. Check with your leasing agent and see what your options are.

Security Deposit

For those of you with less-than-stellar credit, you may have to pay a security deposit up front. It’s a way for the dealership to know that you’re serious about the lease and a bit of an insurance move on their part in case you decide to start being irresponsible.

Leasing a car may be a way for you to improve your credit, so use the opportunity to your advantage, even if you do have to pay the security deposit fee. Just make sure you’re able to post those payments on-time.

First Month’s Payment

If you’ve ever rented, you’ll know that first month’s rent is due at the time you sign the lease. Sometimes it’s pro-rated and other times not, which is similar to what dealerships might do for a car lease. You may need to pay the first month’s balance when you sign the lease, the first payment might be waived, or recalculated into the rest of your lease somehow. Ask your leasing agent how they collect the first month’s payment to see what options you may have available.

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Further Tips for Leasing a Car

If you do end up leasing a car, there are a few more things you’ll want to consider:

  • Check with the dealership to see what specials they’re running.
  • Have the car delivered to your home. Not only is it more convenient, but you also won’t have to worry about listening to an extended sales pitch.
  • Choose models with a high resale value. The less depreciation in value, the lower your lease payments.
  • Keep up on scheduled maintenance.
  • Don’t schedule the end-of-lease inspection at the dealership.

Want to budget ahead of time? Play around with this lease payment calculator from NerdWallet. It’s a great way to know if leasing is a good option for you.

Rebecca Henderson has a Master's in German and a Bachelor's in Creative Writing. She alternates her time between writing and working on a variety of motorized projects. Most recently, she and her boyfriend have been building a custom drift trike. Rebecca believes that language, love, and a life worth living are only the first ingredients to happiness.