Watch Out for These Dealer Fees When Buying a Car

When it’s time to sign the final paperwork for your new car, it’s a good bet that the lines are blurring together and you just want to go home. One last look could save you money. Some dealer fees are required, but many aren’t. Stripping away unwanted add-ons could save hundreds, even thousands, off your costs. We’ll help you differentiate between the two.

How much are dealer fees?

The rule of thumb is that you can expect to pay 8% to 10% of a car’s price in fees. In other words, the cost of buying a car is more than its price. There are required fees, including those payable to your local or state government, and then there are add-ons that might or might not make sense, depending on your situation.
The following are line items the dealership is allowed to charge and must disclose to you, according to state and federal laws.

Documentation fee

The documentation fee or “doc fee,” covers the cost of preparing, printing and then filing that inch-thick pile of forms with your lender, as well as state and local governments. The dollar amount varies by dealership, but states typically require that it’s included in an advertised price. Some states, such as California, set limits on the doc fee — the Golden State caps the doc fee at $80. Massachusetts found that doc fees there ranged from $30 to $599.

Destination charge

This is the freight fee to transport new cars from the manufacturer to the dealer. Like the doc fee, your state will most likely require that dealers clearly disclose the destination charge, but it might not be included in the manufacturer’s suggested retail price (MSRP). Expect to pay between $800 and $1,000, but costs vary by manufacturer. If you see this fee for a used car, ask what it means. You shouldn’t have to pay this, unless it’s a fee for, say, door-to-door delivery to your home or office.

Inspection fee

In many states, a vehicle must pass a state safety inspection (and an emissions inspection if your state has it) before a dealer or private owner can sell it. Dealerships then may pass that cost on to you. State inspection fees are typically nominal, ranging from around $7 to $30.

Tax, title & license (TTL)

Once a new or used car is yours, it needs to be registered with your local government. Rules vary by state, but the basics are what’s known as tax, title and license (TT&L) fees. These cover sales, property and/or use taxes (if your state charges them), plus the cost of a new title showing you’re the owner and a license plate. Your state, county or city may charge additional fees — California, for example, has a calculator you could use to estimate the cost of registering a vehicle there. Dealerships may handle much of the process on your behalf, and therefore, you’d pay fees to them.

Dealer fees you may be able to avoid

Unlike the fees we just described above, you are generally not required to buy any of these things in order to get a car, so don’t feel pressured to do so. Tell the dealer to take them off your contract if you don’t want them. You’ve already worked hard to negotiate a fair price for the car and your auto loan, this is the final step to make sure you’re getting the out-the-door price you planned on.

Gap insurance

Guaranteed Asset Protection, or GAP, covers the “gap” between what your car is worth and what you owe in a situation where your car is considered a total loss by your auto insurance company. You probably don’t need it if you plan to make a down payment, but if not, GAP could be useful. The dealer isn’t your only option: Many companies, possibly including your own auto insurance provider, offer GAP with prices around $299 to $900. Shop around before taking the first offer.

Loan protection insurance

If you were suddenly unable to make your car payments in case you lost your job, became sick or even in the event of your death, loan protection insurance would pay off the remainder of your loan balance. Like GAP insurance, you could look to your own bank or credit union — don’t feel pressured to buy through the dealer.

Extended warranty

A vehicle service contract or extended car warranty is designed to do exactly what it says: extend protection when the manufacturer warranty runs out. Dealers sell them, but typically aren’t the ones to back them. Make sure the company behind the extended warranty is reputable and read the fine print to see exactly what type of labor and parts are covered and for how long. Dealers usually try to sell one for $1,800 to $2,500 but there are other providers as well.

Tire-and-wheel protection

A tire-and-wheel warranty pays to patch, fix or replace your vehicle’s tires or wheels if they are damaged from a road hazard, such as nails, broken glass, pothole or tree limbs. Tires are expensive, but relatively infrequent, purchases. If your biggest fix over several years is a $10 plug for a one-time flat, it may not be worth the price of the policy.

Appearance packages

Window tints, wheel locks and paint sealant are examples of appearance packages the dealer may try to sell you, all at a markup. On Amazon, auto window tint film costs $40, a bottle of paint sealant costs $30 and a set of wheel locks costs $15, for a grand total of $85 for materials. A dealership in San Antonio, Texas sells an appearance package with those three things for $800.
If you want them, try to negotiate for a lower price or ask the dealer to throw them in free, along with vehicle “preparation” fees. You shouldn’t have to pay for someone to wash and gas up the car.
Some vehicles may already come with an appearance package on the car. If these features are already on, it’s impractical to remove them and they are not optional. You may have to decide whether you want to buy a vehicle that already has an appearance package or look for another car or truck.

VIN etching

Dealers may charge to etch your car’s Vehicle Identification Number (VIN) on the windows, but this is something you can easily take care of for yourself through your local police department or car club like AAA. A VIN is like a Social Security number or fingerprint for your car — etched on the windshield or other places makes it more difficult for thieves to resell your car or sell off the parts.

Anti-theft devices

Systems like OnStar and LoJack can track a vehicle’s location in case of theft. Dealers may offer these services as an upgrade while others automatically add them to cars for sale. Consider whether they’re worth the cost before you go car shopping.

Which dealer fees do you need?

Some fees come down to your personal preferences and appetite for risk. If you’re rough on cars, for example, tire protection might be a worthwhile buy. An alternative is to keep a car maintenance fund — the fund picks up the tab in case of a mishap, but if you don’t have any problems, the money stays in your pocket, not the dealer’s. Whatever you do, make sure you understand what a fee covers and what it doesn’t. If you’re not sure what a fee is, ask. Ask before you sign, because once you finish the paperwork and drive off, it could be considered a done deal.

FAQs about dealer fees

Are dealer fees negotiable?
Yes and no. Fees charged by your state or local government are mandatory and cannot be disputed. Fees charged by dealers are allowed by law but must be uniform. They cannot charge one fee for one customer and a completely different fee for another. You could ask a dealer to reduce the price of the vehicle by whatever amount the fee costs. For example, if the dealer document fee is $800, you could ask the dealer to reduce the car price by $800.
What should I pay for a new car?
To find out what you should pay for a new car, look up the car’s value on an industry guide:, NADAguides, Kelley Blue Book (KBB) or Edmunds. All three are completely free for consumers to use. Dealer prices may be higher or lower, but we recommend not paying more than the guidebook value. Here’s more on how to value a car.
What are dealer fees on used cars?
For all cars, dealers charge document and TT&L fees, as allowed or as required by the state. You face the same type of car-buying fees whether you buy a new or used car. The exception is that used cars do not have destination fees. And the good news is that the total used car fees often add up to a lower amount than new car fees because used cars are less expensive.
This article originally appeared on LendingTree.com and was syndicated by MediaFeed.org.

Reclaim Up to $610/Year in Car Insurance

Here’s the thing: your current car insurance company is probably overcharging you. But, who has the time to look around for around a new company?

A website called CarInsurance.net makes it super easy to see if you’re getting the lowest price. All you have to do is enter your ZIP code and your age, and it’ll show you your options.

Using CarInsurance.net, people have saved up to $610 a year.

It takes just a few minutes to see how much CarInsurance.net could put back in your pocket. And the best part? Because we’re driving less, some insurers are slashing prices this month.

Share this article

RECOMMENDED POSTS
How to Talk to Kids About Money
September 17, 2021
How to Talk to Kids About Money
How to Determine Your Net Worth (and Why It’s Important)
September 15, 2021
How to Determine Your Net Worth (and Why It’s Important)
The Pros and Cons of Buy Now, Pay Later Programs
August 02, 2021
The Pros and Cons of Buy Now, Pay Later Programs
Relocating? Here’s How To Pay For Your Next Move
July 29, 2021
Relocating? Here’s How To Pay For Your Next Move
Start Making Money Moves