Understanding Dealer Fees: What You Need to Know When Buying a Car
Published: July 5, 2024
When buying a car, it's essential to be aware of the various fees that may appear on your contract. While you're likely familiar with common charges such as sales tax and registration fees, there are other, less common fees that could surprise you. Here's how to navigate these costs and avoid paying more than necessary.
Common Dealer Fees
Sales Tax: This is a percentage of the total cost of the car and varies by state. For instance, states like Alaska, Delaware, Montana, New Hampshire, and Oregon don’t charge sales tax, but local taxes may still apply.
Title and Registration Fees: These are set by the state and are based on the value and weight of the car. They cover the cost of registering the vehicle, purchasing a license plate, and assigning a title.
Documentation Fee (Doc Fee): Dealers charge this fee to process paperwork. The amount can vary widely, and some states cap this fee (e.g., California caps it at $85), while others, like Florida, have no limit.
Destination Fee: This fee covers the cost of delivering the car from the manufacturer to the dealer and typically ranges from $1,000 to $3,000.
EV-Specific Fees: If you buy a plug-in hybrid or electric vehicle, some states charge additional fees ranging from $50 to $225 to offset reduced gas-tax revenues.
Fees You Can Challenge
While some fees are unavoidable, others can be negotiated or removed entirely:
Preparation Fees: These cover the cost of getting the car ready for sale, but since the destination fee already covers these expenses, this fee is usually redundant.
Advertising Fees: These fees cover the dealer's advertising costs. If they suddenly appear in your contract without prior notice, you might successfully challenge them.
Dealer Add-Ons: Extras such as wheel locks, mud flaps, gap insurance, or extended warranties can increase the vehicle's price. If you don’t need these add-ons, you can opt out.
Paint Protection, Pinstriping, Fabric Protection: These options are often unnecessary and can be removed from your contract.
Anti-Theft Measures: Products like supplemental alarm systems or VIN etching can often be sourced more cheaply from a body shop.
How to Prepare for Dealer Fees
To avoid surprises and ensure you get the best deal, take these steps:
Research Local Fees: Check your state and local tax fees to estimate your costs.
Ask Early: Inquire about dealership fees early in the car-buying process to identify any hidden charges.
Shop Around: If documentation fees are high in your area, compare prices at multiple dealerships, including those in neighboring cities.
Beware of Supplemental Stickers: Some dealerships post additional markups on a second sticker next to the factory window sticker. Avoid these if possible, or negotiate to have these costs removed.
Request an "Out-the-Door Price": Ask for a complete breakdown of all fees before you finalize the deal. This helps ensure transparency and avoids unexpected costs.
Take Advantage of USSFCU Services:
- Car-Buying Service: Use USSFCU's Car-Buying Service powered by TrueCar to find the best deals on new or used cars, saving time and money with a nationwide network of dealers.
- GAP Plus Coverage: Protect yourself from financial loss with GAP Plus, which covers the gap between your auto loan balance and the insurance payout if your car is totaled or stolen.
- Extended Warranty Plans: Consider USSFCU’s extended warranty options to cover potential mechanical breakdowns and avoid hefty repair costs.
By understanding and preparing for dealer fees, you can confidently navigate the car-buying process, taking full advantage of the support and services offered by USSFCU to secure a fair deal. If a fee is unclear, ask the dealer to explain it. This way, you can dispute any unnecessary charges and avoid paying more than you should.
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