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 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.
- You’ll likely have to budget 8% to 10% of your car’s purchase price to cover dealer fees.
- Some dealer fees are required, such as the mandatory taxes from your local or state government. However, some dealer fees are add-ons that can be negotiated or removed.
- To save on money, instead of paying extra fees for protection products, consider setting aside an emergency fund for vehicle issues down the road.
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 you may or may not need to pay depending on your situation.
Some fees come down to your personal preferences and appetite for risk. An alternative to buying protection products is to keep an emergency fund for unexpected expenses; this way, the money stays in your pocket, not the dealer’s.
If you’re unsure about a certain fee, ask about it before you sign. Once you finish the paperwork and drive off, it could be considered a done deal.
How much are dealer fees on a used car?
While the total cost of dealer fees varies 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.
- Tax, title and license fees: These fees are generally regulated by your state government, so they can’t be negotiated. Rates 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 on to 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.
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.
Documentation fee
Also known as a “doc fee,” this charge covers the cost of preparing and filing all the paperwork, including the sales contract and car registration. Each state sets its own standards for what dealers can charge.
Destination charge
If you’re buying a new car, 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 your car 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. Prices vary by state and provider, but they’re typically inexpensive.
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. You’ll typically need to pay sales tax, a title fee and a licensing fee, 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.
Market adjustment
Some dealers charge “market adjustments,” or fees over the manufacturer’s suggested retail price (MSRP) when the market demand for a particular car is high. These fees aren’t regulated and are completely negotiable.
GAP insurance
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 auto insurance providers also 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.
Extended warranty
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.
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 road hazards like nails, broken glass, a pothole or tree limbs. 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. If you want to save money, you can forego these types of upgrades or pay a local auto shop to service these elements.
Some vehicles may come with an appearance package as standard. In these cases, removing it is not possible.
VIN etching
Dealers may charge for etching your car’s vehicle identification number (VIN) onto the windows to protect against theft. Etching the VIN on the windshield and other places can make it more difficult for thieves to resell your car or sell off the parts. However, this is something you can easily take care of yourself, through your local police department or a car club like AAA.
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.
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Frequently asked questions
Dealership fees can add up to 8% to 10% of a car’s price; however, not all of these fees stay in the dealer’s wallet. They include any applicable taxes, registration charges and other fees required by law.
Yes and no. Fees charged by your state or local government are mandatory, and they can’t 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 documentation fee is $800, you could ask the dealer to reduce the car price by $800. Of course, there’s no guarantee that the dealer will agree to the price reduction.
Unfortunately, the destination fee is mandatory and cannot be negotiated. However, the good news is that this fee will remain the same whether you’re flying the car across the country or simply picking it up from the lot.
While you can’t just refuse to pay dealer fees, you may be able to negotiate to remove or reduce some charges. Some fees, however — such as the sales tax, title fee and licensing fee — are mandatory.
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