You worked out your budget and decided on a particular car, but did you include those car dealer fees and extra charges that always pop up when you buy a car? Obviously there are some charges you can expect, but are they all legitimate charges or simply ways for the car dealer to get into your pocket. The extra charges can add up pretty fast and wreak havoc on your budget so make sure you know what is required what can be avoided before you go to the dealership and buy your car. We will break down the fees and charges that are required and those that are nothing more than fees that the dealer charges to make more profit.
The Legitimate Car Dealer Fees
Doc Fee: This is slang for Documentation Fee, which is a charge for processing the documents required to purchase your automobile. Most states regulate the amount that a dealer can charge for the Doc Fee, but not all states. Some states let the dealer charge whatever they want. The doc fee charged by car dealers can be as low as $55.00 and as high as $800. One again this is regulated by the state where they purchase the car. When a state does not have regulations you may be able to negotiate this with the price, but don’t count on it. Most dealers are not willing to negotiate the doc fee; they consider this a fixed car dealer fee.
Title and License: There is not much that can be said about paying for your license pales and title work. This is a state requirement and the purchaser must pay this car dealer fee. However you should know that the car dealership is not allowed to inflate or add anything onto the charge for license and title. You should know that you will be charged a fee if you lost the title for your trade-in which varies by state.
Sales Tax: There is no way around this car dealer fee because the car dealership is actually collecting this charge for the state. None of you sales tax goes to the dealership; it all goes to the taxing government body. Unless you are a non-profit or a government agency of some type you must pay your sales tax. The sales tax on your car may vary by county, but your overall sales tax will be a combination of your state and local sales tax. Sales taxes are based on where you live and register your car and not where you buy your car.
Local Taxes: Typically your local taxes will be included in your sales tax, but some states and or counties have a new car flat tax. This depends on the county or state, but when there is such a tax it’s usually a small amount like $15 to $20 and therefore you will have to pay this car dealer fee.
Car Dealer Fees That Are Questionable
Take a close look at these car dealer fees because these are not required in order to buy a car. However there are dealers that will stick to their guns about these extra charges. The car dealership has the right to charge for their services whether or not you agree with them. It’s your choice whether you should pay them or go to another dealership for your next car. We will break these car dealer fees and charges down for a better understanding of when you should refuse to pay the extra charges.
Accessories or Services: You should be the one to decide if you want any accessories installed on your car, rustproofing, undercoating, paint or fabric protection. Some dealers automatically add on certain items and tell you that the manufacturer requires them, but that is not true. If a manufacture requires anything it will be on the original window sticker and not a car dealer fee. Unless you truly want the items in question refuse to pay for them and have the dealer remove the charge.
Dealer Prep: Years ago dealer prep was a standard car dealer fee added to every new car by the dealership, but not today. The automakers include this in the price of the car and it states that on the window sticker, not the brochure. Today the automaker actually pays the car dealer to prep the car rather having the dealer charge an erroneous or exorbitant amount for dealer prep. If a car dealer wants to charge for dealer prep on a new car find another dealership. Some dealers will try to charge you for dealer prep on a used car, but there isn’t any law against that practice. This is one where you have to decide how bad you want that specific used car and whether or not you want to pay that price. I personally wont pay that car dealer fee, but that’s just me, you have to decide for yourself.
Service Contracts or Extended Warranties: Nothing and no one requires you to buy an extended warranty or a service contract when you buy a car. This is strictly an option that the dealership is offering to you. Lenders do not require you to purchase extended warranties or service contracts when you purchase or finance a car. If a dealership adds this to you buyers order as a car dealer fee without your request they are trying to get in you pocket. This is up to you and not the required car dealer fees.
Life Insurance and Disability Insurance: Most dealers have insurance policies that you can purchase such as life and disability. This is you die you car gets paid off or if you are off of work because of a disability your payments will be paid. Both these options might appeal to you, but they are at your discretion. They are not required in order to purchase or finance a car. These are simply ways to collect car dealer fees and create profit for the dealership, if these products appeal to you the dealership will be glad to sell them to you, but they are not required.
You are now ready to go to the car dealership and navigate the car dealer fees that are required and avoid those that are not. You can figure your car-buying budget without having to worry about excessive and erroneous charges. Having accurate knowledge is one way that can save you hundreds or even thousands when you buy a car. You can also visit the FTC.gov for new car buying tips.