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Dealer Fees to Watch Out for When Buying a Car
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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 what’s necessary and what isn’t, and what to expect in your state.
How much are dealer fees?
You can expect to pay 8% to 10% of a 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 might or might not make sense, depending on your situation.
Dealer fees you can’t avoid
There are line items the dealership is allowed to charge and must disclose to you, according to state and federal laws. These fees are not directly negotiable. That means if there’s a $100 fee you don’t like, you could ask the dealer to take $100 off the car’s price. So you are saving $100. But your contract will still show that $100 fee for legal reasons.
Documentation fee: $85-$1,100
The documentation fee or “doc fee” covers the cost of preparing, printing and then filing that multicolored, thick pile of forms with your lender, as well as state and local governments. The dollar amount varies by dealership. Some states, such as California, set limits on the doc fee — the Golden State caps the doc fee at $85. In Florida, which has no cap, the average doc fee is around $700, but it can go up to $1,100.
Destination charge: $800-$1,700
Whether you’re buying or leasing a new car, expect to pay $800 to $1,700 for its destination charge, which is also called a freight charge. This is the fee to transport new cars from the manufacturer to the dealer. Because dealerships used to inflate this fee to gigantic proportions on a whim and hide it in the manufacturer’s suggested retail price (MSRP), it is now federally regulated. It is a standard, separate fee, with the same price per model that you have to pay, no matter whether you pick up the new car off the assembly line or buy it 500 miles away from the manufacturing plant. You should not pay this for a used car.
Inspection fee: $7-$30
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 and license: varies
Once a new or used car is yours, it needs to be registered with your local government. Rules vary by state, but the basic fees are 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 handle much of the process on your behalf, and therefore, you pay fees to them and they forward it to the appropriate entities.
Car dealer fees by state
Here is a state-by-state table showing the estimated amount you could expect to pay in required fees when purchasing a new or used car from a dealership. We used Edmunds data: the maximum car tax rates, the average Department of Motor Vehicle (DMV) fees and the median document fees in every state. Then we did math based on the average new car price of $39,259 and used car price of $22,351 to estimate what you would pay in fees. If you buy a car that costs more — or less — your fees will go up or down, accordingly.
|State||Estimated fees for a new car||Estimated fees for a used car|
|District of Columbia||$2,681||$1,709|
Source: Edmunds and LendingTree
Note that the table above does not include new car destination fees. As we mentioned earlier, this can tack on as much as $1,700 to the cost of your car.
Dealer fees to avoid (maybe)
Unlike the fees we just described above, you are generally not required to buy any of these following items 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 ensure you’re getting the out-the-door price you planned on.
GAP insurance: $299-$900
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: 0.02%-0.05% of the amount financed
If you were suddenly unable to make your car payments because 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: $1,800-$2,500
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: ~$800
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: ~$1,000
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, car window tint film costs $46, a bottle of paint sealant costs $20 and a set of wheel locks costs $15, for a grand total of approximately $80 for materials. Even if you pay a local auto shop to install these products instead of taking on the DIY project, you’ll still likely to save hundreds. Dealerships typically sell appearance packages for around $1,000.
If you want them, try to negotiate for a lower price or ask the dealer to throw them in for free, along with vehicle “preparation” fees. You shouldn’t have to pay for someone to wash and gas up the car.
Dealers may charge for etching 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 a car club like AAA. A VIN is like a Social Security number or fingerprint for your car — etched on the windshield or other places, making 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.
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 before you sign, because once you finish the paperwork and drive off, it could be considered a done deal.
FAQs about dealer fees
How much are dealer fees typically?
All of the fees you may have to pay to a dealership when you buy a car can add up to 8% to 10% of a car’s price. Not all of these fees stay in the dealer’s wallet though. They include any applicable taxes, registration and other fees required by law.
What is the average dealer doc fee?
Dealer doc fees range from $85 to $1,100, depending on the state and the dealership.
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.
How do you avoid dealer fees?
You can avoid dealer fees by purchasing a vehicle from a private seller. You will still have to pay any inspection, taxes and registration fees that your state charges, though. Here’s how to buy a car on Craigslist.