How Much Does It Cost to Lease a Car?

Quick Facts About Car Leasing Costs

• Use Autotrader’s Lease Calculator to help estimate how much it costs to lease a car.
• The cost to lease a car depends on many factors, including the car price, how much money you put down, taxes, security deposit, and other charges, such as a lease fee for acquiring the vehicle and another for returning it.
• A $0-down promotion does not mean you will drive away without paying any lease fee.

Leasing a car sounds appealing to many shoppers. It’s a way to get into a new vehicle every few years without the high fees and long loan terms often associated with financing the purchase of a new car. But leasing isn’t exactly free, and “no money down” doesn’t mean you can get new wheels without paying something.

Leases have many associated costs. And be aware: These costs always happen at the initial lease signing. This article will analyze these costs and what you should expect to pay.

• First Payment and Down Payment
• Deposit and Fees
• Taxes and Registration
• Bottom Line

Car Lease First Payment and Down Payment 

Just like a lease on a house or apartment, the vast majority of car leases will require you to make a first payment and a down payment. The first payment is, unsurprisingly, equivalent to the cost of one month’s lease payment. The down payment, sometimes called a capitalized cost reduction, is much like the down payment on a car loan.

But you can help lower your monthly lease payment best by paying upfront. A lower down payment creates a higher monthly lease payment and vice versa. Some lease down payments can be zero, while others can be thousands of dollars. This variation often depends on the lease deal you negotiate and the incentive offered by the manufacturer.

RELATED: Car Financing Glossary: Finance Terminology Explained

Deposit and Fees

Security Deposit

Like renting an apartment or a house, leasing a car requires a security deposit at the beginning of the lease term. This deposit serves the same function as it does in a house or apartment lease in that it covers any damage you may do to your leased car. If you return the car free of damage, you’ll get your entire security deposit back. This fee is usually equivalent to the cost of one month’s lease payment. The security deposit isn’t the only fee you might not expect to pay when you lease a car, though.

Acquisition Fees 

Many leases also include an acquisition fee, which a bank charges on every vehicle lease. This $300-$500 fee can typically roll into your down payment. Your payment can also include a charge called the documentation fee. The doc fee can add a few hundred dollars to your initial lease costs.

Disposition Fees

It’s also worth noting that many automakers charge a fee at the end of a lease. This fee, called the disposition fee, helps the automaker cover the costs of selling a leased vehicle, and it’s usually equivalent to or a little more than one month’s lease payment. Don’t be surprised if this fee shows up at the end of your lease term. Instead, be sure to ask about it before you sign the deal.

Taxes and Registration for Leasing a Car

Nearly every U.S. state requires you to pay a sales tax on a leased vehicle. What it’s called, how much you pay, and when you pay varies. Check the details with your state’s revenue department to understand your tax obligation and avoid surprises when signing the paperwork.

Varied State Tax Laws 

States vary in the way they tax car leases. Check your state’s laws before you decide to lease a car. Depending on the dealership’s location, the following taxes can be charged and added to your lease agreement.

• Amount of the down payment
• Total of the monthly lease payments
• Entire value of the vehicle
• Taxes added to monthly payments
• Lump-sum tax payment due at signing
• County, city tax for your specific jurisdiction

State Registration Fees

In addition to a sales tax, you’ll probably have to pay some registration fees when leasing a car. These can vary from state to state, falling within the range of $50-$750.

Bottom Line on Fees

Despite many deals advertising $0-down leases, leasing a car can be more expensive than you might realize. There are a lot of upfront costs that you’ll have to pay, even if you’re getting a no-money-down promotion.

While you can negotiate some charges, not every lease fee can change. Many lease fees are fixed charges. Always be prepared to pay something when you show up to lease your next vehicle. This is true regardless of the car or lease deal. In advertisements, always look for the “cash due at signing” fine print before leasing a car.

Related Leasing Articles:

• Lease vs. Finance a Car: 5 Things to Consider
• Leasing a Car: When is Leasing a Good Idea?
• Pros and Cons of Leasing a Car

Editor’s Note: This article has been updated since it was originally published.