Dealer Fees to Watch Out For When Buying a Car
Whether you buy a new or used car, the purchase is going to come with a few dealer fees attached. The good news, however, is that many of these fees are negotiable. Keep reading to learn more about what fees you can expect and which ones can be negotiated during the car-buying process.
How much are dealer fees?
You can typically expect to pay 8% to 10% of the car’s price in fees. There are required fees, including those payable to your local or state government, and then there are add-ons that may or may not make sense, depending on your situation.
Dealer fees you can’t avoid
Some dealer fees can’t be avoided. Here’s a look at the fees that you typically have to pay when buying a car.
Also known as a “doc fee,” this charge covers the cost of preparing and filing all the paperwork. Each state sets its own standards for what can be charged.
If you’re buying a new car, you can expect to pay the destination or freight charge to cover its transportation from the manufacturer to the dealer. You’ll pay the same cost (by make and model) regardless of whether you buy it 1,000 miles away from the assembly line or pick it up from the factory floor.
Inspection and emission fee
In many states, a vehicle must pass a state safety and emissions inspection before it can be sold — then, dealerships pass that cost on to you. The prices vary by state and provider, but they’re typically nominal.
Tax, title and license fees
Once a car is yours, it needs to be registered with your local government. Dealerships handle much of the process on your behalf, and the rules vary by state. The basic fees are tax, title and license (TT&L) fees, but additional fees may apply depending on your state of residence.
Dealer fees you can negotiate
Unlike the fees we described above, the following fees aren’t required and may be negotiable.
Some dealers charge “market adjustments,” fees over the manufacturer’s suggested retail price (MSRP) that are levied when the market demand for a particular car is high. These fees aren’t regulated and are completely negotiable.
Guaranteed asset protection (GAP) covers the “gap” between what your car is worth and what you owe if your car is totaled. You probably don’t need it if you make a down payment — but if you don’t make one, GAP could be useful. The dealer isn’t your only option for this type of insurance: Many companies, possibly including auto insurance providers, offer GAP. Shop around before accepting an offer.
Loan protection insurance
If you were suddenly unable to make your car payments because you lost your job or became sick, loan protection insurance would pay off the remainder of your loan balance — even in the event of your death. Like GAP insurance, you could look to your own bank or credit union — don’t feel pressured to buy through the dealer.
A vehicle service contract, or extended car warranty, takes over when the manufacturer’s warranty runs out. Dealers sell them but typically they aren’t the companies that 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.
A tire-and-wheel warranty pays to patch, fix or replace your vehicle’s tires or wheels if they are damaged from road hazards like nails, broken glass, a pothole or tree limbs. Tires for gasoline-powered vehicles are expensive but relatively infrequent purchases. Tires on electric vehicles (EVs) need more frequent changes, however, because they’re heavier than conventional vehicles. If your biggest fix over several years is a simple plug for a one-time flat, it may not be worth the price of the policy.
Appearance protection packages
Appearance protection packages protect the paint and interior of your car from cosmetic damage, all at a hefty markup. You can often forego these types of upgrades, or you could save money by paying a local auto shop to service these elements.
Dealers may charge for etching your car’s vehicle identification number (VIN) onto the windows to protect against theft. However, this is something you can easily take care of yourself, through your local police department or a car club like AAA. A VIN is like a Social Security number or fingerprint for your car, and etching it on the windshield or other places can make it more difficult for thieves to resell your car or sell off the parts.
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.
How much are dealer fees on a used car?
While the total cost of dealer fees can vary when you’re buying a used car, there are generally fewer fees to worry about. For example, you won’t have to pay a destination fee if you’re buying pre-owned. Still, there are some fees you can’t get around. We’ve listed some common ones here for your review.
- TT&L fees: Tax, title and license fees are generally regulated by your state government, so they can’t be negotiated. These vary based on the state in which you purchase and register your vehicle. You’ll have to pay them each time a car changes hands.
- Documentation fee: If the dealer pulls paperwork together for your transaction, there’s a good chance you’ll be charged a documentation fee.
- Reconditioning fee: Dealers inspect used cars for any maintenance or appearance issues before reselling them. They may try and pass this cost onto you through a reconditioning fee.
- Extended warranty: If you choose the dealer’s extended warranty on top of the manufacturer’s warranty, expect the cost to be added to your bill.
Which dealer fees do you need?
Some fees come down to your personal preferences and appetite for risk. An alternative to buying protection products is to keep an emergency fund; this way, the money stays in your pocket, not the dealer’s. If you’re unsure about a certain fee, ask for information before you sign. Once you finish the paperwork and drive off, it could be considered a done deal.