When people are looking for a new vehicle, they often weigh the pros and cons of an auto loan vs a lease.
Here’s one key benefit of a leased car: You’ll usually have a lower monthly payment because you aren’t paying for the full value of the vehicle. In a sense, leasing a vehicle is like renting it, usually for a period of two to four years.
If you’re looking at leasing for the first time, you’ll quickly see how this process comes with its own procedures and lingo. And one of its unique terms is a “car lease acquisition fee.” This is also known as a car acquisition fee or an assignment, administrative, or origination fee.
This article will provide you with helpful information about leasing a vehicle, including how you may be able to negotiate the amount of the car lease acquisition fee.
Key Points
• Car lease acquisition fees cover administrative costs like credit checks, insurance verification, and paperwork.
• Typical car lease acquisition fees range from $595 to $1,095.
• Fees can be paid upfront or included in monthly lease payments.
• Negotiation or waiver of fees is possible, but this may affect other terms.
• Similar to real estate fees, car lease acquisition fees are specific to vehicle leasing and generally lower.
What Is an Acquisition Fee?
An acquisition fee is a fee charged by a lender to originate your lease or loan. Because of this, sometimes it’s also referred to as an origination fee. Acquisition fees can include both car acquisition fees and real estate acquisition fees.
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Car Acquisition Fees
There are often various finance charges when you set up a car lease. A car acquisition fee is a fee that’s charged by the organization leasing the vehicle to cover the administrative costs of setting up the lease. These costs can include the pulling and reviewing of credit reports, the verification of car insurance, the creation and signing of paperwork, and so forth.
It’s important to remember that this fee covers only the administrative/document costs associated with setting up the lease, not all costs. There may also be a disposition fee that covers the dealer’s costs at the end of the lease period, for example.
You may be wondering whether all leasing companies charge this fee. Car dealerships do have a significant amount of leeway when crafting their leases, so it’s possible that you could find one without this charge. That said, car lease acquisition fees are widely used in the industry, so it may be challenging to get a dealer to eliminate it unless you’re willing to give up something else in return.
Note: You typically will not pay an acquisition fee when refinancing a car loan.
Real Estate Acquisition Fees
A real estate acquisition fee is a fee you pay when you purchase property, such as a home or commercial property. Similar to car acquisition fees, real estate acquisition fees cover the expenses charged from arranging a property lease or lean agreement, including closing costs, underwriting, real estate agent commissions, and more.
If you’re closing on a property, expect to pay a 1%-2% real estate acquisition fee, though in some cases it could be as high as 5%. In most cases, the larger the deal, the smaller the percentage the real estate acquisition fee will be.
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How Much Are Acquisition Fees?
Car acquisition fees are typically a few hundred dollars but can be more than $1,000. Automotive resource Edmunds.com, for example, shares that the fee typically ranges between $595 and $1,095, depending upon the leasing company and the vehicle chosen.
Overall, a more expensive vehicle tends to come with a higher fee. A luxury vehicle typically has a bigger one than a more utilitarian vehicle, for instance.
These fees can be paid upfront or a portion of the overall fee can be added to each monthly lease payment (more about that choice later).
Does Your Loan Have an Acquisition Fee?
As you read through your lease paperwork, keep an eye out for mentions of this fee and its amount, including in any fine print.
If you don’t see anything or you want clarification, simply ask the dealer or lender you’re working with about the presence and specifics of this fee. Lenders are legally required to disclose fees.
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Can You Negotiate Lease Buyout Dealer Fees?
As a lessee (a person leasing a vehicle), you can ask to negotiate just about any part of the process, including the car lease acquisition fee. The lessor (leasing company) may be willing to negotiate — or it may not.
If it does agree to lower this particular fee, it may boost your interest rate (also called the money factor, lease rate, or lease factor). That means that lowering the acquisition charge may or may not end up resulting in a better deal for you overall.
It can make sense to check with multiple leasing companies to see which one will negotiate the car lease acquisition fee in the most favorable way for you.
If you aren’t able to negotiate this specific fee, there are other methods of negotiating a car lease, from tweaking the vehicle’s valuation to reducing or eliminating other charges and fees.
So, don’t get too hung up on this specific negotiation. Instead, work to get the most favorable agreement overall.
Once you sign a lease contract, of course, negotiations are over. Be sure to determine that you’ve gotten the best lease that you can before you close on the deal.
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Paying Acquisition Fees
There are two main ways lessees can pay this fee: upfront in a lump sum or as part of their monthly car loan payments.
If you decide to make it part of your payment, the fee will be added to the principal amount of the lease with payments calculated on that larger principal amount.
For example, if you have a $30,000 lease and a $700 acquisition fee, you can pay the $700 when signing the lease documents and have your payments figured on $30,000, or you can have a lease amount of $30,700 with monthly payments calculated on that figure.
Which is better?
By adding the fee to the principal amount, you’d pay more overall because of compound interest.
Having said that, if the vehicle is involved in a significant accident (to the point that it’s totaled), you wouldn’t be refunded any of the car acquisition fee if you’d paid it upfront.
If your acquisition charge is included in the monthly payment, though, and the payments stop because a vehicle was totaled, you wouldn’t end up paying the full fee.
No matter how you end up paying this charge, if all goes well with the vehicle, you may decide to purchase it through what’s called a lease buyout. That means that when the lease period has ended, you buy it at the predetermined price listed in your leasing agreement. Note that, in some cases, a lease agreement may prohibit this option. So, if you may want to buy the vehicle at the lease’s end, make sure the language in your agreement reflects that option.
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The Takeaway
Benefits of leasing a car can potentially include getting a lower monthly payment. Then, if you can successfully negotiate aspects of the lease, such as the car lease negotiation fee, you can improve upon the dealer’s initial offer to get an even better deal with your lease.
If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.
FAQ
Is an acquisition fee negotiable?
Yes, an acquisition fee may be negotiable. When leasing a car, it’s best to negotiate with the dealer to get the best deal, which may or may not include asking them to waive or lower the car lease acquisition fee.
Can acquisition fees be waived?
In some cases, yes, the acquisition fee may be waived. However, lenders will oftentimes raise the interest rate when waiving fees, so it’s always best to look at the fine print and figure out which option will get you the best deal.
What is a typical acquisition fee in real estate?
A typical acquisition fee in real estate is 1%-2% of the purchase price of the property, although it could be as high as 5%. Like car acquisition fees, this fee includes the costs incurred to originate your loan or lease, and it may be negotiable.
What is a reasonable acquisition fee?
The average car acquisition fee ranges from $595 to $1,095.
Photo credit: iStock/Mariia Vitkovska
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