Blue toy car on documents being signed by hand So you've gone back and forth with the car salesperson and finally agreed on a price that you're kind of comfortable paying. Then you sit down to sign the paperwork and learn about all of the extra fees and add-ons. Before you know it, you've committed to paying hundreds or thousands of dollars more than what you thought you were going to. Of course, you may have expected to pay sales tax and title and registration fees. But there are also destination and processing fees. Dealerships will often want to charge you for things like cleaning the car, filling the tires with nitrogen, or filling the tank with gas. Some will even try to charge you for their TV commercials and the time the car sat on the lot unsold. One of the most egregious things is the dealer markup fees, which is a way of saying, "You know that price you thought you negotiated with us? Well, just add this much to it for the real price." Then there are the add-ons they try to sell you, like gap insurance and loan protection. And you don't want to drive your new car off the lot with the paint unprotected, do you? Fortunately, the dealer has the coatings and treatments to protect your paint, tires, and interior, all for an additional fee. And yes, dealer fees vary by state. Fees you have to pay Small toy male figure holding sign that says "cost of ownership"; yellow toy car; coins in the background There are some fees that come from the government and you just can't avoid them. Title and registration fees need to be paid, and dealerships are not allowed to add their own markup on these costs. Sales tax, of course, is mandatory and can't be negotiated away. However, if you negotiate down the price of the car, it follows that your total sales tax will be less. Another fee that has to be paid is the destination fee, which for most cars ranges from around $1,000 to $3,000. This is actually a fee charged by the manufacturer, and it pays for the logistics of transporting the vehicle from the manufacturing plant to the dealership. It's like the delivery fee when you order something online. What's wild is that you have to pay destination fees even if you live next door to the factory. The good news is that automakers generally publish destination fees in the small print on their websites. If you look that up ahead of time, you are in a better place to negotiate, as in, "I know you're offering the car for [X], but seeing as I'll have to also pay the destination fee of $1,500, can you come down on the asking price by $1,500?" What you want to look out for, though, is that dealerships will sometimes try to add on their own delivery fees, even if they aren't actually delivering the car to your house. These should be negotiated away. High markups Red toy car on top of U.S. currency and surrounded by calculators So we said that dealerships can't add their own markup on title and registration. That is true, but they are allowed to charge for filing the paperwork. These are called doc fees (sometimes administrative or processing fees). This has been standard practice for some time and you should expect to pay them. Hopefully, you live in a state that caps these fees. For example, California caps them at $85 for most cars, while Illinois caps them at the oddly precise $377.63. Most states don't cap doc fees, which is a shame since dealerships tend to capitalize on that. The average doc fee in Florida, for example, is around $1,000. Dealers may not negotiate this fee, but you can negotiate the asking price down to compensate. You should also be aware that dealerships will often charge separately for e-filing, if your state has that. Sometimes the dealership will add a hidden markup onto the asking price of the car itself. This item shows up as "market adjustment," "ADM," or "dealer markup," and is often rationalized as an adjustment to the price due to demand or scarcity of the vehicle. Basically, you'll think you've negotiated a specific price or just agreed to the asking price, only to find out the real asking price when you're sitting down at the desk in the showroom, ready to sign the paperwork. Sneaky add-ons Green toy car on with sign that says, "Sold", on top of four $100 bills coming out of wallet There are other fees that should really be baked into the asking price. For example, some manufacturers and dealers try to add on an advertising fee to pay for their commercials, charging upwards of $1,000. But advertising is the cost of doing business and should be covered by the up-front asking price. Similarly, dealerships will often charge "dealer prep" fees, which are supposed to cover cleaning the car and filling it with gas. They may also try to charge you for the time the car spent at the dealership unsold through "dealer interest" fees. Other add-ons include things that are just plain unnecessary or you could get cheaper elsewhere. Some dealers will try to charge you anywhere from $199 to $399 to fill your car's tires with nitrogen. It's debatable how much better nitrogen is for your tires than air, but we're willing to bet it's not $399 better. Then there are protection fees. No, that doesn't refer to a shakedown by the mob ("That's a nice new car you have there. It would be a shame if something happened to it."). These fees include things like protective coating for the paint or spray-on protection for the upholstery of your car. They can sometimes charge a pretty penny for this, when it often comes at no cost to them. This is something you should probably pass on at the dealership. You can then shop around for a better deal if you want these protections. Things you should probably pay for, just not to the dealer Money and key fob being exchanged on desk where a red toy car is sitting Dealerships will often try to sell you gap insurance, which is probably a good idea to have on your vehicle. Why? If you total the car before you've paid it off, you're still obligated to pay the loan. The cost of that is often covered by full-coverage insurance, as long as you don't owe more than the car is worth. If you still owed, say $10,000 on your car, but it was only worth $7,000 when you totaled it, the insurance company will only pay you $7,000. That means you're on the hook for the remaining $3,000, unless you have gap insurance, which will cover the difference between what you owe and what the car is worth. The problem is that dealerships will add their own markup to this insurance. You're better off checking with your regular insurance provider to see if they offer it. Something else dealerships may want to sell you is debt protection or credit insurance. This add-on coverage will pay off your loan should you die, become disabled, or find yourself unemployed. It's probably a good idea to have your debts covered in case something happens to you. But this is generally what life insurance is for, if you're already paying for it. If you're interested in insuring against periods of disability or unemployment, you may want to compare what the dealership is offering with various supplemental insurance plans offered by other providers. How to negotiate with the dealership A red toy car on top of calculator; grey toy car in background Lots of people are afraid to negotiate or just hate doing it. Dealerships know this and some of them advertise themselves as "no-haggle" dealerships, which is just a marketing term for "you'll pay exactly what we tell you to pay." As much as these places act like they're doing you some kind of favor, it is in your best interest to negotiate, as you could end up saving thousands of dollars, especially if you research the car you're interested in first. In our experience, we find it best to start off by not with dickering about the individual fees, but with negotiating the "out-the-door" price. That is the total price you'll pay, including all the fees. After they commit to a specific out-the-door price that should be lower than their original asking price, we ask to see the fees. This gives us further leverage to pare down the price. For example, "Well, I don't want the $400 floormats. What if we took those off?" Be prepared to walk away if they can't meet you at a price that works for you. There are other dealerships, after all. And you don't have to walk away mad; it's just business. Are you one of those intrepid buyers who will haggle with a dealer? What tactics do you use? What are some of the surprise add-ons and fees that you've come across that we didn't get to mention here? Let us know in the comments. Want more like this? Join the Jalopnik newsletter to get the latest auto news sent straight to your inbox, and add us as a preferred search source on Google.
Liked by Liam Pelletier, Owen Turner
Liked by Liam Pelletier, Owen Turner
Liked by Liam Pelletier, Owen Turner