BUYER’S GUIDE: Understanding Dealer Fees

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No matter what you kind of car you want, the one that finally ends up in your driveway depends on how much you can afford to buy. You haggled, you figured out what your trade is worth, and now it’s time to sign on the dotted line.

There are lots of fees on that contract and it can be confusing figuring out why you’re paying all of them. This BestRide Buyer’s Guide gives a breakdown of what they are and whether you should pay them or tell the dealer no.

Sales Tax

Cars are expensive, which means the sales tax can be a frighteningly large number. Unfortunately, if you live in a state that charges a sales tax, then this is a necessary evil.

You don’t always have to pay the tax at the dealership, but you do have to pay it in the end. Even if the dealer doesn’t collect the fee, when you head to the DMV to register your car they’ll require you pay any sales tax due before you register your car.

If you choose not to pay this at the dealership, then be prepared. Make sure you have the cash on hand to pay when you’re ready to register.

Registration Fees

You cannot drive a car without registering it so this is another fee you’re required to pay by law. Many dealers collect the fee on behalf of the government so you don’t have to make a trip to the DMV.

The money they collect isn’t money they keep and they don’t set the fees. You can complain to the government about that one, but trying to get the dealer to reduce the fee won’t work. They’re merely a middleman trying to make it easier for you to get your car on the road.

Title and License

Dealers charge these fees because they don’t have a choice. This isn’t money they’re getting, but rather money they’re collecting on behalf of the government the same as sales tax and registration fees.

The amounts required are all set by law and often varying depending on the cost of the car you’re purchasing. There’s no point in trying to haggle these numbers down because there’s no way around this one. They’re completely legitimate fees.

Dealer Documentation Fees

This is money the dealer charges to do all the paperwork required to make the sale official. It includes sales contracts, DMV filings, and any other documents needed in your state.

The fee can vary widely and be as little as $100 or as much as $700. Certain states put a cap on the amount dealers can charge, but otherwise, each dealer can charge whatever they think is appropriate.

It’s worth investigating how much a dealer will charge before you sit down to make the deal so you can make a wise dealership choice. Going down the street could save you hundreds of dollars on your purchase.

You can try haggling these numbers down, but it’s a fixed number that dealers are unlikely to change. It doesn’t hurt to ask, however, and you lose nothing by trying to reduce the charges and save yourself a few bucks.

Destination Fees

This is how much the automaker charges the dealer to get the car from the factory to the dealer’s lot. The dealership and the automaker might be in the business of selling the same kind of car, but they’re not one company. The dealer pays plenty of fees to get the car to its lot and you’re on the hook for the cost.

The amount they charge ranges from around $700 up to $1000 and the dealer covers that cost by passing it on to you when you make a purchase. It should be listed on the window sticker, so you can see this one at the start of the transaction.

Like dealer documentation fees, it’s very unlikely that the dealer will budge on this number, but you can always try your luck and see if you can get it reduced.

Regional Ad Fees

It seems ridiculous, but the automaker charges the dealer for advertising used to sell you your car in the first place. This is a fee added to each vehicle by the automaker to help cover the costs of advertising and is not set by the dealer.

Sometimes the lingo varies a little from company to company, but you will see this listed as some kind of advertising fee on the invoice. Make sure you’re only paying for advertising fees the automaker is charging to the dealership, not for any local advertising done by the dealership itself.

These are two different charges. The first one is fine since it’s set by the automaker, not your local dealership. The second one is another story. If they’re trying to charge you for their local advertising costs, then challenge the charge and try to negotiate the amount down.

It’s important to note that advertising fees should be a number that’s clearly visible at the start of the transaction on the invoice and not suddenly appear when the paperwork is ready to sign. If the fee does only make an appearance when things are being wrapped up and you’re ready to sign, then ask questions.

Any fee that surprises you is worth questioning. It might be something optional that was added without your consent in the hopes you simply wouldn’t notice. If you don’t know what a fee is, then ask, and see if it’s something you can eliminate.

Dealer Prep Fees

All the protective plastic, random stickers, and helpful labels need to be taken off your car before they hand you the keys. They also give it a once-over to make sure the carpets are clean and it’s bright and shiny when you drive away. Dealers like to charge for this apparently arduous task to add a few dollars to the sale.

This is a markup that you absolutely don’t need to pay. Tell them you don’t want to pay for this service and you have a good chance of arguing the fee away before the deal is finalized. A few minutes of peeling stickers off your car shouldn’t cost you hundreds of dollars.

These are the more common fees you’ll see when you purchase a car, but there are all sorts of things that dealers will add in at the last minute. You’re tired and you’re done, but you need to pay attention.

If you see a fee you don’t understand, then ask what it’s for and be prepared to argue it away. Although some of the numbers on that bill of sale are fixed, you have the right to ask for an explanation of every charge and can try to have any fee reduced or eliminated before the sale is final.

Nicole Wakelin

Nicole Wakelin