Car Dealer Fees To Avoid When Buying a Car
By Aaron Crowe
Reading a car dealer’s invoice or purchase order for your new car can make you feel as though you’re reading a foreign language. There are a myriad of things to consider when you are purchasing a new vehicle, from finding an affordable car insurance policy, to reading the fine print on the list of extra surcharges.
The terms can be confusing, and unless you question them before you drive your vehicle off the lot, you may be stuck paying extra dealer fees for something you don’t really want or need. Before asking for dealer fees to be taken off your bill, you have to understand what they are.
People are often faced with many fees when buying a car, not to mention sales tax. A dealer’s invoice will list some fees, but it mostly shows the dealer’s cost to buy the car from the manufacturer. However, that cost won’t include discounts and incentives that dealers get when buying from manufacturers, making the car dealer’s cost cheaper than it appears on the paperwork.
Instead of relying on the invoice to reveal dealership fees, car buyers should ask for the purchase order for the car they want to buy, says LeeAnn Shattuck, chief “car chick” at Women’s Automotive Solutions, a car buying service. And do it long before you write a check to purchase a vehicle.
“You do not want to see those fees when you’re ready to sign on the dotted line,” Shattuck says.
The purchase order will list the buyer’s total price to get the car out the door, she says.
“Most dealers are pretty good about advertising the full price,” she says, including fees and tax information.
Some fees are a part of doing business and should be paid by the dealer, and others usually fall to the customer, such as sales tax. But there are some car dealer fees to avoid if you plan to purchase a vehicle. Here are some dealer fees to look out for, and question, on that order:
Destination Charge. Also called a shipping charge or delivery charge, this can be about $800 and is what the manufacturer charges to deliver a car to the dealership. It’s a fee that can’t be avoided and is simply part of the price of every new car, Shattuck says.
When advertising a car’s price, some dealers will subtract the destination charge from the advertised price and then add it later, making the car look less expensive than it is, she says. Or it will be in the fine print of the dealership ad.
Dealer Add-Ons. Also called dealer accessories, these don’t have to be disclosed line for line, and can range from $50 to $250 per item, and $600 total, Shattuck says.
They’re things added by the dealer to your car, which you can sometimes get the dealer to remove, she says, though some are too difficult to take off of the vehicle. They include pinstriping, wheel locks, mud guards, and nitrogen in tires. Nitrogen doesn’t expand or contract under extreme temperatures, and it is meant to provide more stable air pressure when it’s extremely hot in the summer or cold in the winter, she says.
Other dealer add-ons include rust, paint and fabric protection — all things you probably don’t need and may be able to remove during car negotiation prior to buying.
Documentation Fee. Also called an administrative fee, it can go from $500 to $800 and covers a dealer’s paperwork costs. Some states cap this dealership fee, such as $100 in New Jersey, Shattuck says, while others don’t have a limit.
“All it is is dealer profit,” she says.
California has a flat rate of $65 for documentation fees, while they can range from $359 to $800 in Nevada where they aren’t regulated, says Sarah Lee, owner of My Carlady, a car buying service.
The doc fee can’t be negotiated because anti-discrimination laws require that it be the same fee for everyone and that one class of people, for example, can’t be charged a lower fee than someone else, Shattuck says. Either everyone pays the same fee, or they don’t pay it at all.
Buyers can try to get around it by either shopping around at different dealers for the lowest doc fees, or asking a dealer to deduct the amount of the doc fee from the price of the car, Shattuck says.
Market Adjustment Fee. Mostly used on limited production cars as a way to mark up a car’s price so they have more negotiating room, car dealers use this to get thousands of dollars more for a popular car, Lee says.
Popular cars such as the Dodge Viper or Ford Shelby Mustang GT500 are in limited production and can be sold for $10,000 more than their suggested retail price with this fee, she says. The cars can become antique collectibles and can gain value.
To fight this, some manufacturers don’t allow cars to be sold for more than the MSRP — their suggested retail price — and may hold back dealer inventory if such fees are charged, Lee says.
Title/Tag Fees. These can sometimes be tied in with the doc fees at a dealership. They can save you a trip to the DMV and may be worth the expense, and some dealers may charge exactly what the DMV charges for title and license tag fees, Shattuck says. Some dealers may charge a little more money than the DMV does, so comparing costs among dealers may save you some cash when buying a car.
Dealer Prep. Also called reconditioning fees on used cars, these can run from $200 to $500, Shattuck says, and are simple things dealers do to get the car looking good and in running shape. They can include detailing, washing the car, and adding oil and other fluids. If you have to pay extra to have oil put in your car so you can drive it off the lot, you’re not getting much service from your car dealer — and that’s why this is one of the top used car dealer fees to avoid..
Desert Protection. Like the dealer add-ons listed above, this costly fee can sometimes be avoided by making sure it isn’t added to your car if you don’t want to be buying the service. It can cost from $400 to $1,900, Lee says, and is a “finish on a finish” so that you don’t have to wax or clean your car as often. It’s meant to protect a car’s finish from acidity from bird droppings and acid rain, for example.
Vehicle Theft Registration. This is another dealer add-on that can be put on a car before it’s sold, and it is difficult to remove. It costs about $400 and is an identification number that’s usually etched on the driver’s side window as a way to deter thieves, Lee says. It’s different than the VIN number and is supposed to make it easier to find the car’s owner if the stolen car is found. The etching isn’t done at the car factory, making it an easy fee for a car dealer to add at the lot.
When running into such dealer fees, the best advice may be to shop elsewhere. At the very least, ask for fees that you think are unnecessary to be removed prior to buying a vehicle. In the end, a lower price will save you money not only on what you pay for the car but also on the final amount you owe in sales tax.
“You just need to look at things upfront, ask questions and shop around,” Shattuck says.
