Buying a Car? Fees You Should Never Pay
Buying a new or even a reliable pre-owned car is not a cheap proposition nowadays. Besides the sticker price on the car, there are many other fees and extras that we have to pay on top. Some of those fees are understandable, reasonable and completely legitimate. Others, though, just seem to raise more questions than they answer.
In today’s blog, we are focusing on those fees that you will likely see when buying a car but that you should absolutely not pay. If you see them, you should negotiate to have them removed from the price, or just walk away. A decent-enough dealer may apply them at first — trying their luck — but will remove them when pushed.
To start though, let’s be clear on three additional fees that are legitimate and are for the most part rightly paid by you, the buyer:
Legitimate Additional Fees Paid by You
There are always state and local taxes to pay when buying a car, whatever their size. The most well-known one is the sales tax, which is charged at city, state and county levels. There are sometimes others, too, such as vehicle license tax and personal property tax. Interestingly, the state with the highest sales tax on new cars is Oklahoma, which charges 11.5 percent, closely followed by Louisiana at 11.45 percent. Montana, Delaware, Oregon and New Hampshire are the lowest, each charging a very handsome zero percent.
Title and Registration
The cost of this will vary greatly from state to state. Here in California, you will pay $62 plus a “transportation improvement fee” or “TIF,” which is charged from $25 to $175. The TIF fee I the cost incurred to cover road maintenance and repairs to infrastructure. In Delaware, the registration is much cheaper at $40 all in.
The title fee also varies, but is invariably lower than the registration fee. In California, drivers pay just $15 for the title fee, which is nice after being charged a hefty TIF when registering the vehicle. Other states average from $25-50 for the title fee.
Destination Charge (new cars only)
If you are buying a new car, then there should be a single — and only singe (more below) — destination charge that you have to pay. You should see it on the window sticker. The destination charge is built into the invoice price that new car dealerships are paying for the vehicle, so it’s only fair that it is there itemized in your own invoice. You do have to watch out for additional destination fees, though. We have more on that further below.
We have placed this one in the “legitimate” pile, but that may be slightly controversial among some drivers, because there are many drivers who would object to these fees. This is the fee that the dealer is charging you for completion of all the paperwork on your new car. It was certainly nice of them to do all of that, and there’s much less chance of any mistakes being present in the paperwork when an experienced automotive professional has done it, but it can irk some buyers.
Here’s the rub. You might think the doc fee is unjust, especially in states like Colorado where the median doc fee is as high as $598, according to Edmunds, but the dealership cannot legally remove it from your invoice. Luckily, it’s shouldn’t be more than $85 in California, and the dealership may be able to lower the amount by reducing the car price, but they can’t take away the doc fee from the invoice.
That sounds crazy, but there have already been legal cases involving dealerships being sued for taking the doc fees off the invoice.
Next, we’ll get into the meat of today’s blog, which are the fees that you should never pay:
Dealership Fees You Should Never Pay
Dealerships will always try and upsell you with this offer of “pure” nitrogen to be put in your tires before you leave the dealership. They’ll fill your head with notions that nitrogen will last longer in the tires and that it’s better than regular air. It certainly sounds fancy, especially when they start throwing the word “pure” out there, but you shouldn’t pay for this.
The main reason is that the common air that you breathe is already made up of 78 percent nitrogen. That means that even if every claim the dealership makes about nitrogen is true, it can only be maximum 22 percent better, but scientifically speaking that number makes no sense at all.
Don’t let them get you on nitrogen. It’s not a real benefit, and in reality, it’s akin to a restaurant waiter trying to sell you much more expensive French wine with a famous name that doesn’t really taste any better than the local house wine.
Additional Destination Fee
As we mentioned in the previous section, when you buy a new car, a destination fee is a normal charge. It’s part of the car’s invoice price that the dealership pays to the manufacturer. The dealership may, however, attempt to attach a second destination fee. Since the original destination fee is built into your MSRP, and is already itemized in the original window sticker, any additional fee is nothing but a cash grab. You are well within your rights to ask them to remove that. A good dealer will.
Used cars, of course, shouldn’t have any destination fee attached to them at all. If you are buying a used car, and you see anything resembling a “destination fee” on the invoice, then walk away or insist that it be removed.
Sometimes you can get a great deal on a car if you choose one that is already on the lot without making any modification or ordering one of a different color or other specification. It’s good for the local car dealership to shift any and all inventory from the lot, and some may have been sitting there for some time.
Let’s say you’ve found a nice car on the lot that you like that has rear tinted windows or privacy glass. In fact, it was that privacy glass that first attracted your attention. It’s just what you want, so you say you’ll take it. On the paperwork, you notice that you’ve been charged a rather princely sum of $450 for window tinting. If you had ordered a stock model with window tinting as an upgrade, then this fee would be legitimate, but this car already had the tinted windows.
This practice is more common than you know. You shouldn’t be paying for parts and labor on something that the dealership didn’t even do. It shouldn’t involve an additional fee.
This is another fairly common charge that many buyers fall for because they imagine that it’s very useful. When you’re spending money on a brand-new or near-new pre-owned car, fabric protection to safeguard all that attractive (and expensive) upholstery sounds great. The thing is, though, that with new cars at least it’s not necessary since the cars come with fabric protection already applied.
An additional layer may give you more peace of mind, but it’s not worth the additional expense for the majority of buyers.
Reconditioning / Dealer Preparation
Both of these words are fancy terms for what is essentially cleaning the car and getting it “sale-ready.” Keeping the car looking nice for the showroom is a regular part of a dealership’s running cost. It is absolutely unfair that they should try and pass this charge onto you, the buyer. It would be like a supermarket trying to charge you an additional fee for a pyramid display of fruit that attracted your attention to the product in the first place.
Making the cars look great and having them clean and ready for sale to buyers like you is part and parcel of the dealership daily routine. Don’t you pay for that.
Car History Reports
The two most common sources for car history reports are CarFax and AutoCheck. When you’re buying used cars, getting such a report is an absolute must, but it’s not something that you should have to pay the dealer for. If a dealership is operating normally, they will get these reports on pre-owned cars that they are selling anyway. It’s a regular part of the sales pitch, and why they like to distinguish between “pre-owned” and “certified pre-owned.”
The latter is a kind of code meaning “we have checked this car thoroughly, including its history, and we are confident to sell it to you as it is.” When you ask for a CarFax or AutoCheck report, they already have it, so charging for it is really unjustified.
Just about every new car dealership will try to convince you to buy an extended warranty. In the majority of cases, they are unnecessary. If you are buying a used car and an extended or separate warranty is being added to it because the original one has expired, then it’s not necessarily a bad idea. For new cars, however, they are wholly unnecessary.
This could be something that changes in the US, since the average length of time that the American driver holds on to his/her car has gone up in recent years. In 2019, HIS Markit data showed that the average American keeps their car for 11.8 years. Since there is no standard warranty that would go on that long, it might be a good thing to get an extended warranty.
The extra fee for an extended warranty might be $1500 depending on the brand and model of your car. If this is a car you know you want to commit to for a long time, then perhaps consider it, but if not, then best to ignore it. The good news is that new car dealerships won’t try to sneak this one onto your invoice as they do with many of the other items in this list. They may try to push for it with their upselling technique, though.
Of all the additional fees in this list, it is perhaps this one that most easily riles up savvy buyers. Why in the world would a smart buyer accept paying a surcharge applied by the dealership to cover the cost of the marketing and advertising for the vehicle that they are purchasing. Imagine if companies who advertised at the Superbowl did that when you bought their products! “Those Superbowl ads are pricey, you know!”
You shouldn’t accept any advertising or marketing charge; however it appears. This will be one of those that the dealership hopes you don’t notice, and may struggle to justify through explanation.
This is the final item in our list today. This fee is applied to that small slice of car buyers who offer to pay in full for the car using cash. They don’t want any kind of financing (and therefore no interest), and just want to buy the car as you might do a Big Mac. The uninitiated among car buyers might believe their cash offer would be welcomed, but us more clued-in buyers know the real deal.
The dealership doesn’t necessarily like cash deals because the car financing part is where they can really turn a profit. We have already discussed above how dealers are selling cars at or close to the invoice price. Therefore, they have to get their profit elsewhere. If you pay cash, you take away a potential profit center, so they try to hit you with a surcharge. If you spot this, then do not pay it.
Conclusion: Read the Paperwork Carefully
Additional fees are a big source of income for many local car dealerships. With many incentivizing buyers by selling the cars at or close to the invoice price — the price they paid the manufacturer for it — dealerships need to find alternative revenue streams.
The above additional fees, you will notice, tend to follow a pattern of being things that cost the dealership either nothing or next to nothing to do. This means that the money they’re charging is entirely profit. With these additional fees, plus the bonus they may receive from the manufacturer for selling a unit, makes your sale a more profitable one.
The lesson here is to always read through your sales invoice and make sure you are not being charged for any of the above things. If you have any questions about items on the invoice, you should ask the dealer to explain it. The ones that appear unreasonable usually reveal themselves as dealers struggle to justify them.
Better yet, you can avoid many of these pitfalls when buying a car in southern California by agreeing a price in advance right here on CarBevy. You can cut out the tricky negotiations and get a straight answer on your bottom-line figure. Get in touch with us today to learn more.