When leasing a car there can be many taxes that often can be different in each leasing company, or even state. The names of these taxes can even be different in leasing contracts. In this guide we found most of the taxes and fees.

Knowing a few of these fees and taxes may help you from over paying. Take a look at a few...

When you lease a car it is different than buying a car. When you lease you make your first payment when you sign the contract. When you buy a car you make loan payments at the month in which they are due. The first leasing payment that you make is a payment, and not a down payment or a security deposit.

The leasing company decides if you make a security deposit and how much. They usually decide this by looking at your credit scores. A Security deposit is a fee that you pay at the signing of the contract, and is usually the same amount or a little more than what you pay for your monthly payment. Do not confuse a security deposit with a down payment. You will get back your money at the lease-end, unless you have gone over on mileage, or any damage charges. Down payments, you do not get back at the end of your lease.

It is usually a good thing to not put any down payment on your lease in case your car get stolen or totaled in a crash, you will not get this deposit back.

This fee is not usually noted in your contract. It is added to your Cap Cost, when they calculate it to your payments. An Acquisition fee is most often called a “bank fee,” and is administration charged by the leasing company. It depends on your leasing company how much it is, but it is usually between $200 -$950. Of course expensive luxury cars have a higher acquisition fee. Be careful, even though this is a fee set up by the leasing company, dealers are increasing the fee to add a little more profit for themselves. If you do not see this fee mentioned in your contract, ask the dealer about it. If you feel that they are increasing the number for profit, you could try to negotiate to bring the price down.

This is a typical fee by the leasing company, and is sometimes not charged by the leasing company. It all depends on the leasing company. It is due at the end of your contract to pay the leasing company for the fees of selling or disposing the car. It is usually between $200-$500.

Some leasing Companies may still charge you this fee even if you decide to buy the car a the end of the contract. You could definitely try to negotiate out of this fee.

If you decide that you want to make a down payment (capitalized cost reduction), you will be charged state and local tax fees on the down payment. The amount is determined by the state. You pay this fee at the signing of your lease contract.

In some states, you are required to pay taxes on the entire car, not just on the down payment. Bellow we have more detail on this information.

Documentation, Registration, License, Tag, and Title Fees

These can be sometimes tricky fees, and could be unofficial fees by the dealer for profit. Unfortunately, they are difficult to determine which fees are official and which are not, they are often given official-sounding names. Some of these fees though, are normal fees that you would expect to pay when you buy or lease a new or used car.

At the time of signing a lease you will pay the first month’s payment, down payment (if you choose), sales tax on the down payment (depending on the state), security deposit, any official fees (state/license/registration fees). All these fees together are known as “lease inception” fees.

Take note that the down payment is only a part of the lease inception, often people think that the down payment is the total amount of the lease inception fee.

If there are any other fees such as admin fees, you can pay them up front or include them in the capitalized cost.

The acquisition fee is not usually paid up front in cash. It is included in the capitalized cost and it is also financed along with the lease.

The disposition fee is due at the end of the lease when you bring the car back and even sometimes if you buy the car. There is some states that charge a tax on the disposition fee.

At the end of the lease, you receive back your security deposit.

Sales Taxes

In the U.S. and in Canada they impose a sales tax on cars. When you lease, the leasing company is passing the sales tax to you. Each state has its own way of imposing these taxes.

When leasing in most states you only pay taxes on the part of the car you lease. The most typical way to calculate that is to tax the monthly lease payment at the local sales tax rate. Lets say you local tax rate is 6%, you multiply 6% by you monthly lease payment. Then you add it to the payment amount, and the total amount is your total payment figure.

You should ask your dealer before you lease, or even your state taxing authority, how sales taxes are applied to your loan. Try to find out how much the sales taxes will be where you live.

Often times you will pay for taxes based upon where you live, not from where you are leasing the car. If you decide to move during your lease, you taxes will typically change, and even at times will require a cash payment. If you plan to move anytime soon, find out how it would affect your leasing contract. You could find out by calling the tax agency of the state you are moving to and ask.