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What is Out The Door Price When Buying a Car?

By Melissa Spicer | October 14, 2021

When car shopping, "out-the-door price" refers to the bottom-dollar price the dealer is willing to accept for the vehicle you want to buy.

Keep in mind that there is generally a lot of wiggle room between the manufacturer's suggested retail price, or MSRP, and the out-the-door price. It's something that will affect the monthly payment, whether getting a car loan or leasing.

A primer on out-the-door prices can help demystify the car buying process, so you enter the showroom empowered to get a good deal on your new car.

Why Does the MSRP Matter?

The MSRP is a number the manufacturer sets and dealers use to start new vehicle price negotiations, and it is the figure that you likely see on the window stickers of cars that interest you. However, many car buyers don't know that there are thousands of dollars of negotiating room built in between the MSRP and the car's final price. Some car dealerships may include several fees and costs to increase their profit on new vehicles or pad the invoice price itself.

After you negotiate the price of the car itself, taking those other items into account creates the bottom line known as the out-the-door price. Understanding this price point can help you get the best car deal.

What the Out the Door Price Includes

Additional fees are often part of the cost of purchasing a new car. For example, sales tax, registration fees, title fees, tire recycling, and documentation fees are unavoidable expenses you should expect to pay, and they will inflate the total cost or total price of your new or used car.

However, be aware of other costs that seem unnecessary and aren't easily explained by a salesperson. Here's a look at some of the fees you may see on a vehicle's price sheet.

Sales Tax

Sales tax is included in your out-the-door price or OTD price. If you're shopping away from a local dealership, the tax is the rate in the state, county, or city where you register your new car — not the state where you buy it.

States typically charge sales tax on the list price before a cash rebate or other incentive. So, for example, if the cost of a new Toyota Camry is $30,000 and qualifies for a rebate that lowers the selling price to $28,000, the sticker price will be taxed.

Sales tax on your trade-in depends on your state's rules. For example, some states subtract the trade-in value of your old car from the new vehicle before assessing the tax. If your state is one of them, such as Alabama, Colorado, Florida, and New York, check your bill of sale to ensure the car dealer has given you the proper credit because that can make a big difference on the OTD price. Therefore, if there is a $5,000 credit for your trade-in on a $30,000 Ford Escape in Florida, the tax is based on $25,000. Get an idea of the trade-in value by checking with Kelley Blue Book (KBB.com) or Edmunds.com using their free appraisal calculator tools.

Registration Fees

Depending on the state, average registration fees can cost less than $40 to more than $1,000. Check with your Department of Motor Vehicles (DMV) or similar state vehicle agency to ensure you're not being overcharged.

Documentation Fees

Document fees can range into the hundreds of dollars. But states such as California, Illinois, New York, and Maryland cap their so-called doc fees. For example, in Illinois, as of 2021, the maximum documentation fee is $303.60.

In more than 30 states, however, there are no caps. That can be a deciding factor between which dealership to buy a car.

Advertising Fees

When you look at the invoice price of the car, you might see an advertising fee, which is a charge the manufacturer imposes on the dealer, and that the dealer charges you. That's legitimate, but what some dealers do is tack on an additional fee for an advertising fee, including it in the sales contract as a way of offsetting their advertising costs. Challenge this additional charge and ask for it to be removed, or bargain for a lower car purchase price.

Destination Charge

Automakers add a destination charge when they transport new cars from the assembly plant to dealerships. And there's no industry standard for the fee, so a Honda can have a wildly different destination charge than a Jeep, for example.

The fee appears on the dealer invoice, and this is a legitimate fee that car dealers pass this upfront cost to buyers. However, it's often not noticed in the dealer or manufacturer advertising but put in the fine print. Unfortunately, it's not negotiable.

Dealer Prep

Dealer preparation is a fancy way to say the dealer checks the tires, fluid levels and washes the new car. It's necessary, but it shouldn't be costly. If you see a charge of hundreds of dollars for dealer prep, ask that it be lowered or ask for an additional concession on the final price.

Vehicle Identification Number Etching

Etching your new car's vehicle identification number (VIN) into its windows is an excellent anti-theft measure, one that insurers and law enforcement agencies encourage.

But it's not required. So if a dealer has already done it, you're likely in a position to negotiate to have it removed or the fee significantly reduced since it was done without asking.

If your dealer does it for you, expect a charge of hundreds of dollars. To keep your out-of-door price as low as possible, take this fee off your bill and find an alternative provider for this service. Some local police departments perform it or get a do-it-yourself kit for about $30.

Extended warranty

Sales associates like to sell new car purchasers extended warranties (beyond what coverage comes standard on the new vehicle) because they add significant profits for the dealer. However, these additional warranties aren't required, so you don't have to buy the extra coverage when purchasing a new car.

If the dealer is trying to sell you an additional warranty, it's a good idea to take it off and spend some time comparing coverage between it and other aftermarket warranties. Experts recommend getting policies backed by the automaker or a well-respected third-party company.

Fabric and Paint Protection

Some car dealers may want to tack on fabric protection if your car has fabric seats and charge several hundred dollars for it. Opt for buying a can or two of Scotchgard, apply it yourself, save your money.

Car dealers have another way to pad the bottom line of car prices, offering paint protection for several hundred dollars. But with the improvement of paint finishes, the dealer's service here is not more than a glorified waxing. So instead, purchase some paint sealant for about $10, do it yourself, and pocket the difference.

Additional Dealer Fees or Add-Ons

If you're buying a top-selling model, you may see an additional dealer fee or add-on to boost their profit. Although you can request that they remove or reduce this fee, the dealer might not budge if there's high demand for that vehicle. So it's usually perfectly legal for them to charge an additional fee here if a customer is willing to pay it.

The out-the-door price has components that you can control to keep your price low. Don't be shy about asking the car dealer for what you want and making it clear what you don't need.