What You Can Expect at the End of a Car Lease

There isn't a consensus about whether it’s worth it to lease a car. However, what happens at the end of a car lease isn’t a matter of opinion. Your car lease contract will outline the fees you might have to pay—and the one you’ll definitely pay—when the two-year or three-year lease is up.

In fact, knowing what fees are in store at the end of a car lease will help you determine what car you can afford, whether you should lease a new car or buy a used one, and how you can get back on the road after the lease ends.

According to Edmunds.com, the benefits of leasing a car include paying lower monthly payments with low or no down payment, driving a better car for less money, paying less in repair costs because of the included warranty, transitioning easily to a new car every two or three years, avoiding trade-in hassles, and paying less sales tax.

Of course, the pros come with cons. You don’t have equity in a leased car because you don’t own it, you have to pay for exceeding your allotted yearly mileage, you ultimately pay more in the long run if you end up buying the car, you could pay hefty wear-and-tear charges, and there’s a fee to terminate a lease early.

Near the end of a car lease, you’ll be notified that it’s time to submit your car for an inspection (unless, of course, you decide to buy the car). The inspection will take place at the dealership where you leased the car, a nearby dealership, or an independent inspection firm. The inspector will check out the car inside and out. You might be charged for anything beyond what is considered “normal wear and tear.”

After that, you’ll have some options. You can trade in the car for a new lease, you can return the car without getting a different car, or you can buy the car you were leasing. Your dealership might also allow you to extend the expiring lease on a month-to-month basis.

In addition to any fees for mileage or car damage, some car lease contracts subject you to a disposition fee, which covers the cost of putting a vehicle back onto the market, according to Credit Karma. Sometimes called a “turn-in fee,” the disposition fee is charged at the end of the contract and it often costs a few hundred dollars. You might be able to avoid paying the fee if you buy the car or if you lease or buy another vehicle from the same dealership.

It might be worthwhile to buy your car when your lease ends, especially if you damaged the car or went over the mileage allotment and you’d prefer to spend the money you’d have to pay in fees on buying the car instead.

However, as Policygenius notes, the money you will spend to buy the car—the residual value listed in your lease contract—might be more than the car’s actual value. Also, keep in mind that you will have to pay sales tax and DMV fees again if you choose to buy the car. Policygenius recommends reading the terms of your lease and gauging the condition of your car to figure out if this option is right for you.