What Fees Are Associated With Buying a Car?
Dealer Fees & Car Taxes and Fees: The Lowdown
By Mandy Rozen, Auto Consultant, Scottsdale
Dealer fees, car taxes, and other add-on accessories or services can add to the price of a car. Here we’ll drill down on what fees are associated with buying a car, which ones are non-negotiable, which ones you should question, and when to walk away.
Buying a car should be a pretty straightforward process, but with so many different dealers and prices to choose from, it can be difficult to know what’s an acceptable fee and what is price padding. Most car buyers can expect to pay an additional 12-13 percent in fees on top of the price of a car, so it’s smart to plan your ‘out the door’ maximum price in advance to avoid going over budget.
Standard Fees Associated With Buying a Car: New or Used
● Sales Tax – Sales tax on vehicles vary from state to state down to a local level. In Arizona, approximately 8 percent of the added fees is non-negotiable sales tax. Document fees, license and registration will also be included.
● Document Fees – Document fees cover the cost of preparing and filing the sales paperwork and related documents. Document fees depend on what state you live in. Some states cap fees, meaning the dealership can charge up to a maximum amount for this service.
● License and Registration: This is the amount charged by the state to register and title your new vehicle and to issue license plates.
Common Extras in Dealer Fees & Questionable Add-Ons
You can find the additional fees and charges listed in the addendum column of the sales contract. Carefully look these over as many are negotiable or can be compared to other dealers, or refused outright. We always walk through these with our clients – no hidden fees with Auto House!
Finance Office – If you’re financing your vehicle purchase or leasing, there might be an additional charge for generating and processing the loan documents, which may be negotiable.
Gap Insurance – Vehicles depreciate from the moment you drive off the lot. If you finance your car (which most people do), it makes good sense to purchase a gap policy. Gap insurance covers the difference between your loan and the current value of your vehicle if it’s totaled or stolen. Some lenders may require it, while others consider it an option.
Dealer Prep – This fee covers getting the car ready for you to take home, and can be as simple as washing it, especially if it’s a new car.
Delivery Fee – This fee should already be included in the price of the car and will be listed as “Destination Fee.” Don’t get fooled into paying it twice, so watch for it in the final paperwork.
Dealer Advertising Fee – The advertising fee listed on a car’s manufacturer invoice is made by the manufacturer to the dealer and included in the MSRP of the vehicle, and paid by the customer. Some dealers will try to sneak another local advertising fee into the sales contract, so don’t fall for it.
Extended Service Contracts – These can make great sense for many car buyers; however, not all policies are created equal. A large portion of them are expensive and packed with fine print exclusions that render them basically useless. The good news is you don’t have to buy an extended service contract at the same time as you buy your car and the extended service plans we offer at Auto House aren’t packed with those sneaky exclusions. Learn what you need to know about extended service contracts and warranties here.
Optional add-ons can make sense depending on your driving habits and lifestyle. Make sure to only purchase items like these from a trustworthy dealership like Auto House, that way you know you’re only buying the add-ons that make sense for you and your family. These include:
● Window tinting
● Wheel locks
● Ceramic coating
Maintenance Packages – These are separate from extended warranties. It can make sense to purchase a maintenance package depending on your lifestyle and budget. Trust Auto House to lead you in the right direction.
Desert Protection Package – These are presented as protection against the harsh desert sun and terrain.
Tire & Wheel Protection – Tires are an infrequent purchase, but can be costly to replace. Depending on your driving habits this might be of benefit. Discuss with your auto consultant to determine if tire and wheel protection is right for you.
Liability Insurance – This should be part of your car insurance, not purchased from a dealer.
Finally, it’s worth noting that trading in your old car when you’re buying a new vehicle can reduce the amount of sales tax you will owe on your purchase. At Auto House, we’re not in the business of selling products our customers don’t need, which is why we have consistently earned five-star ratings and a large repeat customer base. We’re here to help you navigate the process and get a great deal with no hidden fees. Still have questions? Let us know how we can help.
For more about dealer fees you should never pay, see this article from US News & World Report.