Dealer Fees: Which Ones Should I Pay?
After you've poured in all the hard work to negotiate a price you're satisfied with, you realize there are a bunch of other fees tacked on.
The last thing you want when buying a new vehicle is unexpected fees, and the key is to understand and know which ones to push back on or negotiate down.
Table of Contents
- Required Fees
- Dealership Fees
- Financial Fees
- Additional Fees
- Fees to Negotiate
- Fees to Avoid
- How to Negotiate Dealer Fees
- Best 0% APR Deals by Category
- Frequently Asked Questions
Some legitimate fees are required when you buy a car. These fees include:
The documentation (or "doc") fee is the cost for preparing the documents to sell the car. This fee covers the cost of doing the office paperwork required to sell a car. This is a legitimate fee, but the cost can vary drastically from $50 to $500. Typically, you won't find out about this fee until you are about to sign the vehicle's paperwork.
Every state has a registration fee, which is how much it costs to register a new car. The registration fee also covers the cost of the license plates. The dealership provides the registration service for you, and the cost will depend on the vehicle's price. More expensive vehicles have higher registration fees. The registration fee is typically not negotiable with dealers, but some dealers may offer specials that waive the fee.
Sales tax is another non-negotiable fee that comes with buying a car. The sales tax varies by state, and it's based on where you register the car (not the state you bought it in).
The destination fee is meant to cover the dealership's cost to get the car delivered from the factory. Typically, the destination fee is non-negotiable, and you may still have to pay it if you pick your car up right from the factory.
Manufacturers require dealerships to participate in regional advertising. Many dealers then try to charge an advertising fee so that you cover the cost of the advertising.
Many dealers will add a fee of around $200 to account for preparing the car for sale. However, you're already paying the destination fee, which is to cover dealer expenses.
Extended Warranty & Maintenance Plan
Many dealers will try to sell you an optional extended warranty. You can negotiate the features and price.
Credit insurance is optional, but the cost won't be negotiable. The purpose of credit insurance is to cover your car loan after an accident. Some policies will also kick in if you lose your job, become disabled, or pass away. Your car loan should not require you to buy this add-on, and some life or disability insurance may offer similar benefits.
Guaranteed asset protection (GAP) insurance is required for some leased vehicles. However, it's typically optional if you are buying the car. If the vehicle is stolen or totaled, the GAP insurance will cover the difference between your loan and the vehicle's value.
Loan Payment Fees
It may be convenient to get your loan through your dealership, but if you do so, you will have to pay an additional fee so the dealer can pay their bank.
New vehicles may come with a "market adjustment" fee. It's not a required fee, so it's one to push back on.
Additional Dealer Markup
The Additional Dealer Markup is basically just another way for dealers to make a profit. It's often arbitrary but can easily be missed, so keep an eye out for any ADM fees. Ask the dealer specifically about the ADM and why it's being charged. This is often enough to negotiate the fee or get rid of it altogether.
VIN etching/Anti-theft Measures
Getting the vehicle identification number (VIN) etched on the windshield will supposedly deter thieves. Some dealerships will offer VIN etching or other anti-theft options like alarm systems or tracking units for an added fee. You can often get VIN etching done for cheaper somewhere else or even do it yourself with a simple kit.
Dealers may add equipment like mudflaps, window tinting, or wheel locks and try to charge you for it.
Paint & Fabric Protection
It's very inexpensive for the dealership to perform, but they may charge a hefty fee for it.
If you were looking for a particular model, color, or version of a vehicle, you might have to pay additional transportation fees to get it shipped to the dealer. You could still try to negotiate for the dealer to cover this cost, and you should certainly not pay this fee if the vehicle was already on the lot as you're already paying the destination fee. Demo cars typically do not require this fee.
Fees to Negotiate
The top two fees to negotiate are:
- Dealer preparation fees. The dealer preparation covers the cost of washing and preparing your car. Ask if this is required and find out about avoiding the fee.
- Additional transportation fees. Instead of paying an additional destination or transportation charge to get a specific vehicle in the lot, see if the dealership will cover this cost to get you to stay with them.
Fees to Avoid
Of the potential dealership fees, there are some you should try to avoid. Push back on the following fees:
- Advertising fees Arguably, the dealer should include the cost of regional advertising in the car's price, not tack it on as an additional fee.
- Dealer add-ons. Most of these services you can get done elsewhere for less money.
- Paint protection. Consider getting it done elsewhere rather than letting the dealer overcharge you for it.
- Anti-theft measures. Opt to have these services done elsewhere if they are of interest, it will be less expensive than at the dealership.
- Market adjustment. This is an optional and arbitrary fee. Ask the dealer to explain the fee and the reasoning behind it. It may be one you can negotiate on or eliminate.
How to Negotiate Dealer Fees
Here's how to negotiate dealer fees without losing out on the car:
- Determine your local fees. Find out what you need to pay for sales tax, registration, and documentation.
- Ask early. Ask early on in the process, as this will position you as an informed buyer and help to guide your overall negotiations.
- Shop dealer fees. Some states may have higher documentation fees. Consider looking at dealerships in neighboring cities or states for better prices on documentation fees.
- Examine supplemental stickers. Markups and dealer add-ons may be available on a supplemental sticker next to the factory sticker. Beware of these dealerships, or at the very least state that you will not pay for those items.
- Request the out-the-door price. Ask for a full breakdown of all the fees. This way, you know exactly what's included and can see which fees to negotiate or how the fees should impact your overall price negotiation.
Dealer fees are a cost of car buying that can take you by surprise. It's important to know the breakdown of all the fees so that you can make the most informed negotiations.
Frequently Asked Questions
Are dealer fees negotiable?
Some dealer fees are required and others are negotiable. The required fees are registration, documentation, and sales tax. Any other fees you may be able to negotiate.
Which fees should I pay when buying a car?
When buying a car from a dealership, you must pay for registration, documentation, and sales tax.
Which dealer fees should I not pay when buying a car?
Avoid paying the dealer for:
- Dealer preparation charges
- Paint/fabric protection
- VIN etching
- Additional transportation fees outside of the destination fee
Which dealer fees are legitimate?
The legitimate dealer fees include:
- Sales tax
What is a destination fee?
The destination fee is a shipping fee the manufacturer charges to transport the vehicle to the dealer lot. The dealer passes on this cost to the car shopper, and it will always be listed on the MSRP window sticker/ included in the vehicle invoice.
How do I avoid dealer fees?
While you cannot avoid some dealer fees, you should seek to avoid the optional fees. The best way to do this is to ask for the out-the-door price and to negotiate that cost rather than negotiating the cost of the vehicle and the fees separately.
How much are the dealer fees when buying a car?
The cost of dealer fees varies by the dealership, state, and vehicle. Ask for the out-the-door price so you can see a breakdown of how much you'd be paying in dealer fees. Do your research ahead of time to find out how much the required fees cost in your state.