Dealer fees: What to know and how to avoid them Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive financial calculators and tools, publishing original and objective content. This allows you to conduct your own research and analyze information for free – so that you can make your financial decisions with confidence. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this website are provided by companies that compensate us. This compensation may impact how and when products are listed on the site, such as, for example, the sequence in which they appear in the listing categories, except where prohibited by law for our mortgage, home equity and other products for home loans. However, this compensation will not influence the information we provide, or the reviews that you see on this site. We do not cover the entire universe of businesses or financial offerings that might be open to you. SHARE: Photographee.eu/Getty Images
3 minutes read. Published July 14 2022
Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers to navigate the ways and pitfalls of taking out loans to purchase an automobile. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to manage their finances by providing concise, well-researched and informative information that breaks down otherwise complicated subjects into digestible pieces. The Bankrate guarantee
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We are compensated in exchange for the promotion of sponsored goods and, services, or by you clicking on certain links posted on our website. This compensation could affect the way, location and in what order items are listed and categories, unless it is prohibited by law for our mortgage, home equity and other home loan products. Other factors, such as our own proprietary website rules and whether or not a product is offered in your area or at your self-selected credit score range may also influence the manner in which products appear on this site. Although we try to offer an array of offers, Bankrate does not include details about each credit or financial products or services. When you’ve negotiated the price of your new car, you might be shocked by a final sale amount of hundreds maybe even thousands of dollars higher than the price you initially agreed to. Most of these extra charges, or dealer fees, are required by law, like title, tax and licensing fees. But some fees are completely dependent on the dealer and can be negotiated . Fees for dealers you can eliminate and negotiate Not all fees the dealer can throw at you is a requirement or cannot be negotiated. Make sure you are ready to refuse unnecessary options and haggle the costs of the items you’re interested in. Dealer or vehicle preparation fees Vehicle or dealer preparation fees are charges the dealer charges to make the car prepared for delivery. These include cleaning the car, taking any “bump protectors” from the doors or disposing of the protective coverings for the floor or the seats. It could cost hundreds of dollars more, so it’s worth being aware of. What to do: U nless the dealer has gone above and beyond basic preparation, refuse to pay these dealer charges. Extended warranties and accessories installed by the dealer. These extra items are purchased when you make the sale but only if you requested these items and were able to prove that you are being given a fair cost for the item or service. They could include an unintentionally stolen vehicle recovery system -like LoJack — paint sealant or an aftermarket system for sound or wheels . How to avoid: If a dealer tries in requesting payment for one of these items and you didn’t request these items, you should not pay the associated fee. If you did ask for the items, you should shop around to make sure you’re getting a fair price because you can get all of these items when you own the vehicle. VIN etching or vehicle identification number is the grouping of 17 characters that identifies the car. The process of VIN engraving is to protect yourself. It etchs the number on the car’s windows. It could cost anywhere between $150 and $300, which is why it’s wise to stay clear of this cost and handle it on your own. It’s one of the easiest fees to avoid, so make sure to plan to keep it from slipping into the paper cracks . How to avoid: S ay no to this fee and cut costs by going directly through an auto shop for this service. You can also find DIY kits online that costs between $20 and $40 . Extended warranty is an additional fee that can cover potential car repairs once the manufacturer’s warranty on the car expires. But they’re not required for everyone. If you’re concerned about the price of possible repairs to your vehicle, it might be wise to rethink the you’ve chosen to purchase. If it’s worth the cost, consider other options instead of relying on the dealer’s offer. How to avoid: C increase the amount of this cost against the possibility that it’ll actually be used before signing off on it . Gap insurance Guaranteed asset protection or , is an extra cost that you could be met with if you lease a car. It covers the difference between the value of the car and loan payments if the vehicle is destroyed or stolen . What to do: even if you have a lengthy loan period and have no money down, this cost is something you should avoid. At least 20% on your down payment so that it is unlikely that you end up on your loan. Unavoidable dealer costs There are other dealer fees that you will not be at a disadvantage, but you can prepare for them . Tax, title and license fees The fees for title and license are the cost for the process it takes to get a vehicle title and a license plate. The cost of the tax fee will depend on the sales tax rate in your state’s rate. It is not negotiable . Learn more: To understand the process for your state, go to your state’s Department of Motor Vehicles (DMV) website. Documentation fee The documentation fee is the cost for processing all the paperwork associated with a new car purchase and is the amount you have to pay. Some states will charge the fee in one lump item that is typically well under $100. Other states have no specific rules, which means that dealers is free to charge whatever they want. Takeaway: What you pay will vary based on the state in which you reside and the dealer you’re working with. To understand the standard price, check out local laws. The fee for destination is the amount is required by the dealer to get the car from the factory. Kelley Blue Book notes that these charges can cost upwards of $1700. According to Edmunds the process of taking your vehicle to the factory will not save you the destination charge — you’ll likely still have to pay the entire amount. Takeaway: This fee cannot be changed and could be an enormous portion of the bill. The bottom line Although there are some dealership charges that are necessary, knowing which are negotiated or eliminated altogether is the key to saving money when it comes to your next car-buying experience. Before you even step foot into a showroom , conduct some research and math prior to your visit to better comprehend .
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the details of taking out loans to buy an automobile. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain confidence to manage their finances through providing concise, well-researched, and well-written details that cut otherwise complex subjects into bite-sized pieces.
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