So, you’ve settled on a new (or gently used car) within budget. Finally, you’re ready to sign on the dotted line and bring the wheels home. Car commercials make it seem as easy as that – find a car in your price range, sign some paperwork, and you’re good to go.
But you won’t just be paying for the price of your vehicle. Dealerships tack on numerous fees to the price of a car, and you may not see all of them until it comes time to sign the paperwork. At the end of the day, dealership fees can add thousands of dollars to the price of the car. So now you’re wondering, do you have to pay all the fees? And what are they for, anyway?
Car dealership fees confuse many car buyers, but you don’t need to feel intimidated by them. On the contrary, understanding car dealership fees empowers you to negotiate your car’s price down and helps you feel more confident in your buying power at any dealership. Keep reading to explore different dealership fees and how to avoid and negotiate them to keep your next vehicle more affordable.
9 Types of Common Car Dealer Fees
Every car dealership adds different types of fees to their contracts. However, various dealer fees are more commonly used than others in auto dealerships. Some fees help a dealership offset its costs for doing business, while others help the dealership turn a profit. Common dealer fees include
The documentation fee covers a dealership’s time preparing documents for a vehicle’s purchase. You may also find it a “conveyance fee” or “processing fee.” Documentation fees are usually minor compared to the cost of the vehicle and range from $100 to several hundred dollars.
The destination charges or fees reimburse the dealership for delivering a vehicle to you. You’ll typically pay this fee regardless of if you order the vehicle from the factory or pick a car off the lot because all cars need delivering to the “destination,” aka the dealership.
Running a dealership isn’t cheap. Some car dealers will tack on an “advertising fee” that helps the dealer cover advertising costs and doesn’t necessarily have anything to do with the car’s value.
Dealer Preparation Fees
When you pick up your car from the dealership, it should look nice, shiny, and clean. Some dealerships will charge you a “preparation fee” for the car wash and vacuum job.
Title and Registration Fees
Some dealerships offer their customers assistance with title and registration. The dealership will file paperwork to receive a title, license plates, and registration papers for your new vehicle. Dealerships that handle the paperwork for title processing will charge fees for the work.
Depending on where you live, you may have one or more kinds of sales tax applied to your vehicle purchase. In some areas, you may pay city and state taxes on vehicles.
The dealership may charge a financing fee if you have used credit or loan financing to purchase your new vehicle. The fee covers the dealership’s time as an intermediary between you and the lender.
Extended Warranty Fees
Most dealerships offer the option for an extended warranty to cover purchased vehicles. However, if you elect to use an extended warranty, you’ll have to pay a fee for the coverage.
Service Contract Fees
Most car dealers offer a service contract that helps cover repairs and services after a vehicle’s warranty expires. The fees vary based on what the service contract covers.
How to Negotiate Car Dealer Fees
One considerable benefit of understanding standard car dealer fees is that you can now negotiate your car dealer fees. Here’s how:
Do Your Research Beforehand
It’s important to know that you can’t negotiate all kinds of car dealer fees. However, by researching the fees you can expect to encounter at the dealership, you can prepare a list of fees to try negotiating with the dealer.
Know Which Fees Are Negotiable and Which Are Fixed
Unfortunately, you can’t negotiate all dealership fees. Some, like sales tax and registration fees, apply to state or county prices. However, you can usually negotiate down dealership-specific fees, including the extended warranty, advertising, and occasionally the destination fees.
Don’t Be Afraid to Negotiate
Dealerships rely on a client’s inexperience with dealership fees to ensure they get their money’s worth on a product. Your knowledge of the fees will help you negotiate – so be confident in your ability to negotiate. Let the dealership know you are willing and ready to discuss fees and work with them to negotiate a fair negotiation.
Consider Negotiating the Price of the Car Separately From the Fees
If you cannot negotiate down the fees related to a car, consider negotiating down the actual price of the vehicle. It’s often easier to negotiate the price of the car than to navigate a fee negotiation.
How to Avoid Car Dealer Fees
In some instances, you can avoid car dealer fees altogether by doing the following:
Shopping Around at Different Dealerships
Shopping around can give you bargaining power if you don’t have a specific dealer in mind. Research the fees associated with each dealership. You may find one dealership has lower fees but a higher vehicle price. In that case, you could try to negotiate the cost of the car based on the lower price at another dealership.
Consider Buying From a Private Seller
Private sellers don’t charge dealership fees. If you really want to avoid extra fees, you can buy from a private seller. However, keep in mind that buying a private sale involves other risks; usually, the vehicle won’t come with a warranty.
Consider Purchasing a Used Car
Some dealership fees come solely with new cars. Purchasing a used car can mean fewer fees. Unfortunately, that’s not always the case, so shop around and compare prices and fees the same way you would with a new car to ensure you get the best deal.
The next time you walk onto a dealership lot, you’ll understand the difference between documentation and advertising fees. You can navigate the nuances of sales tax and registration costs without worrying about paying too much for your vehicle. Understanding car dealership fees gives you, the buyer, more power. It allows you to walk onto the lot with knowledge and the confidence to negotiate the best price for your next vehicle purchase. Ultimately, this knowledge will give you the power to decide whether to work with a dealership and their fees or avoid car dealer fees altogether by purchasing a used car or going with a private seller.