• Buying Guides

Fees When Buying A New or Used Car - Explained

By Autolist Staff | March 11, 2019

Whether you're buying or leasing, it's important to keep a watchful eye on the numbers as you negotiate the deal. Have a calculator with you and be ready to take a total at the end. Make sure that the finished contract has the correct purchase price that you agreed on, or in the case of leasing, the capitalized cost. Further ascertain that the trade-in amount, rebate and/or a cash down payment has been subtracted. If you're using dealer financing, make sure to check for the correct interest rate. While you're looking over these numbers, you'll likely run across a range of extra charges and fees. It's a good idea to check whether these charges are legitimate as you'll end up paying interest on them unless you pay them upfront. Read on to see a list of common dealer fees and charges that you might encounter.

Destination Charge

This is a delivery fee that is passed along to you from the dealership. It's preset by the automaker and should be the same across all models from a specific brand. It's basically the cost to transfer the vehicle from the factory to the dealer lot and it is a legitimate charge. However, sometimes dealerships will try to add an extra charge with names like pre-delivery inspection or dealer prep among others. These are not legitimate fees and you should contest having to pay them.

Registration and Title Fees

Generally, dealers have an arrangement with the Department of Motor Vehicles to provide title and registration. They may give you temporary plates and you will pick up your permanent plates later at the same dealership. These are obviously legitimate fees when buying a car that you will have to pay upon buying or leasing. None of these fees go to the dealership either, but instead directly to the state. In this case, the dealer is making it more convenient for you as you won't have to visit the DMV yourself.

Documentation or Conveyance Fee

These fees when buying a car cover the general cost for the dealership to process official paperwork for the sale, plus the title and registration. In some states, the dealer is strongly limited at how much they can charge, but a lot of states do not impose any limit. Dealers usually charge somewhere between $100 and $500, and the final amount is usually already printed on their sales contracts. It's fairly difficult to get a dealership to waive or reduce this fee. However, you can work it into your negotiations by trying to get the price reduced by the same amount, or you can attempt to get a free accessory thrown in, such as a cargo net, branded floor mats or similar.

State Sales Tax

The sales tax you pay will vary from state to state and some states charge for the entire amount and others subtract the trade-in from the purchase price and then tax that only. If you buy a vehicle outside of your own state, you will pay the sales tax of your home state when you register the car. Many dealerships will handle registrations from nearby states. For example, if you buy a car in Oregon where there is no sales tax, but register the car in Washington, where you live, you'll be paying the Washington sales tax.

Regional and National Ad Fee

This might sound like a dubious charge on the surface, but it is legitimate. Automakers charge branded dealerships for national advertising. At the same time, regional dealer associations also have charges for their local ads running in papers, on the radio and on TV. Typically the dealer will pass some of this charge on to you when you buy or lease. The charge should be fully revealed upfront before you start negotiations. If they try to hit you with it at the end with no warning, then you should challenge it.

Extended Warranty Fee

This is not usually something that's randomly tacked on, but something that you'll get the chance to either buy or leave on the table. What it does is add extra coverage for any major repairs needed once the manufacturer warranty ends. It's a good idea to make sure that the coverage is backed by either the manufacturer or a well-known and established third party. You don't have to buy these right away either; you can take some time to compare coverage and contracts.

ADM or Additional Dealer Markup Fee

This is actually a pure profit fee for the dealer, and it might seem rather brazen for them to tack it on, however, if your vehicle is a hot-selling model, you might not have any leverage to get it removed. How do you recognize this fee? Any fees that are not listed on the original manufacturer invoice are generally tacked-on dealer fees.

Dealer Prep Fee

This is not a paperwork prep fee, so don't let this slide if you see it. What is is a fee to clean up the car and remove any protective coverings or coatings that were applied during shipping. However, the manufacturer has already paid the dealer to do this, so there's no reason for you to pay them again.

Disability and/or Credit Life Insurance

These are specific insurance fees to cover the vehicle payments if you die before the payments are fully made or if you become disabled and are unable to work. However, these are not things that you should purchase at a dealership as they are almost always cheaper elsewhere.

Pinstriping

This charge covers the application of expensive, paint-like tape applied to the car to give it a sporty look. If you really want this added to your vehicle, it's cheaper to have it done at a detailing shop rather than the dealer.

Rustproofing or Undercoating

Modern vehicles are already made to withstand harsh weather and treated roads, so additional coverage is typically not needed. The dealer may tack these fees on in an attempt to get you to pay for something that is, in effect, already there.

VIN Etching

Some states actually require that dealers offer this service to you, but you do not have to buy it. It's essentially a security measure where the VIN is etched into the glass, thus making it harder to remove if the car is stolen. As with some of the other service fees, you can usually get it cheaper elsewhere or even do it yourself.

Fabric Protection and Paint Sealant

These are simply the equivalent of Scotchgard and wax respectively that the dealer will charge you a premium for. Again, you can do both of these yourself or have them done cheaper at a detailing shop.

Security Systems

Dealer may also offer to install these for you, but again will charge you a premium for it. Either don't bother with it, or have one installed at a car audio and accessory shop that will charge you much less.

One final thing to remember is that any fees not listed on the manufacturer invoice are fees you should potentially question.

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