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Dealer Charges
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Dealer Charges

Charges for extra services or products sold by the dealer, including rust proofing, undercoating and extended warranties.

More On Dealer Charges

Charges for extra services or products sold by a car dealership, including rust proofing, vehicle preparation, advertising, documentation, floor plan, administration, undercoating and extended warranties. Most dealer charges represent pure profit to the dealership and can be negotiated.

Charges for extra services or products sold by a car dealership, including rust proofing, vehicle preparation, advertising, documentation, floor plan, administration, undercoating and extended warranties. Most dealer charges represent pure profit to the dealership and can be negotiated.

Car dealer sticker prices usually include several amounts in addition to the manufacturer’s suggested retail price. The additional fees may be small enough to ignore, or they may add thousands of dollars to the purchase price.

Some dealer charges are for services or upgrades that the buyer wants, like rust proofing, undercoating or a premium paint color. These should be itemized so buyers can see what they are getting and what they are being charged. Some fees are customary or required by law. A transportation fee is standard in the industry and covers the cost of shipping the car to the dealer.

Other dealer charges do not add value for the buyer and should probably be challenged. For example, there is often a fee titled “additional dealer markup” (ADM) or “additional dealer profit” (ADP). This is just another way of increasing the vehicle’s price and the dealer’s profit. Sometimes dealers can get away with it when the car is in low supply and high demand. Buyers have to decide if they want the car badly enough to pay extra for it. Other times it might be completely negotiable.

Another fee that sometimes appears is an advertising fee. Buyers who don’t feel that they should foot the bill should refuse to pay some or all of this charge. Another nebulous fee is the “dealer prep” charge. This is the cost to the dealer to make the car suitable for a new owner. This may mean nothing more than removing plastic film and washing the car. Buyers should decide what that’s worth to them when they negotiate their purchase.

There should NOT be a charge for a “holdback.” Holdback is actually a rebate that the dealer gets from the car manufacturer.  If the dealer charges the buyer for a holdback, it’s double dipping – getting paid by the buyer and the manufacturer.

Many automotive charges are “garbage” fees for items that provide little or no value to the buyer. Their entire purpose is to pad the dealership profit margins. Of course, dealers need to earn a profit – no one works for free, and automotive sales can be a tough business. However, dealers are professionals who deal in automotive negotiations every day, while the average car buyer purchases between nine and 13 cars in his or her lifetime. Consumers should therefore do everything they can to get the best deal possible.