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How is an Early Car Lease Termination Fee Determined?
Early car lease termination fees are not so much penalties as they are a fulfillment of the contracted value of the lease. The lease amount is based on the value of vehicle’s depreciation during the lease period, and its residual value at the end of the lease. Also included in this value are any dealer prep costs, optional equipment, taxes, the dealer’s profit, or the leasing company’s interest (profit). If terminated early, the calculated residual depreciated value of the vehicle plus the residual interest is included in the fee. A dealership may have a lower termination fee because they can sell the vehicle at its depreciated cost and will not tack on residual interest owed.
