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ROAD & TRAVEL Auto Advice: Car-Buying Fees Confusion
Unexpected Car-Buying Fees Can Add Up Quick

Car-buyers are often surprised to learn that after they finalize their vehicle purchase price, dealerships add in taxes and tack on fees that can boost the vehicle's price by as much as $3,000. Are these costs negotiable?

"Unexpected costs at dealerships can really upset car-buyers, and can even be a deal breaker if the fees put the car above the buyer's financial limit," said Philip Reed, senior Consumer Advice editor at Edmunds.com and co-author of Strategies for Smart Car Buyers. "Early in the shopping process, consumers should ask dealerships about the fees they charge and take that into account as they negotiate."

Some add-on costs are levied by the state and some are generated by the dealership itself. Added costs that you may encounter at dealerships include:

  • Documentation Fee: Charged by the dealership to process the sales documents. Also known as "doc fees," these are regulated by some states, as the chart shows. If the state does not set a maximum, the fee could be negotiable.

  • Vehicle Registration Fee: Charged by the state to register the car, assign title and pay for license plates.

  • Sales Tax: Charged by the state, with additional amounts sometimes levied by cities and counties. In some states, buyers only pay tax on the difference between the new purchase and the trade-in. Also, states treat incentives differently, as shown in the chart.

  • Destination Charge: Charged to the dealer by the automaker to cover transportation from the factory. The fee is typically passedv on to the buyer and is not negotiable.

  • Dealer Fees ("Shipping," "Dealer Prep," etc.): Charged by the dealer to recoup business costs. These fees may be negotiable or avoidable.

  • Advertising Fee: Charged by either the manufacturer or the dealer to recoup marketing costs. If the fee is listed on the car's invoice — something the buyer should always request to see — Edmunds.com recommends the consumer pays it in full. If the fee is written into the contract, the fee may be negotiable or avoidable.

"In recent years, fees have become more important to dealerships because their profitability has suffered from the transparency of pricing that didn't exist before the Internet. So, consumers who negotiate forcefully may help to generate a very stressful transaction," said Reed. "Customer satisfaction typically results from a fair deal and a pleasant interaction, and that requires effort from both sides of the desk."

Taxes and fees differ greatly in different regions. The following chart gives some examples of how widely costs vary across the country:

State

Maximum Possible Sales Tax (%)

Average Registry Fees Charged

Maximum Documentation Fees

Trade-In Sales Tax

Are Incentives Taxed?

Arizona

10.70

$500

No limit

Yes

Yes

California

8.75

$232

$45

No

Yes

Florida

7.50

$182

No limit

Yes

Yes

Georgia

8.00

$38

No limit

Yes

Yes

Illinois

9.25

$143

$55.39

Yes

Yes

Michigan

6.00

$216

$170

No

No

New York

9.00

$78

$45

Yes

Yes

Texas

8.25

$85

$50

Yes

No

A chart containing information on all states can be found here.

"Consumers should do as much research as possible before buying a car so they are never taken off guard. Know the Edmunds.com True Market Value price of the new car and the trade-in, be aware of incentives and rebates available, and be prepared for the fees and taxes that will be charged," said Reed. "Also keep in mind that the price of a vehicle is not the only expense.

(Source: Edmunds)

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