Attached to every advertised price for an automobile there is usually a bit of fine print that reads 'does not include destination charge, tax, title, license, and fees' or wording quite similar. These additional, and oftentimes, unavoidable fees and additional costs can be substantial, so it's wise to understand what they are and which ones you can avoid when shopping for a vehicle.
We will start with the non-negotiable fees and charges. These are likely non-negotiable fees you will encounter when purchasing a new vehicle.
The destination charge is the amount automakers charge dealerships to deliver a vehicle from the factory to the showroom. This charge differs between manufacturers and occasionally between different models from the same automaker. This charge is not dependent on distance and is the same amount regardless of where the vehicles are being delivered or where it is coming from. Since this charge is fixed and unavoidable for the dealer, it is usually fixed and unavoidable for the car buyers. Destination charges are usually several hundred dollars. For example, the destination charge on a 2009 Chevrolet Cobalt was $670.
This one is mostly self-explanatory. Taxes are charged based on the location in which the vehicle will be initially registered (usually your place of residence), not the location of the dealer, so it is not possible to head across state lines to get a break on the tax bill. The only way to avoid paying sales tax is to maintain a residency in a state that does not have sales tax. If your place of residence or the state in which you register the vehicle has sales tax, this is an unavoidable and non-negotiable charge. Rates vary significantly, and can add hundreds -- if not thousands -- of dollars to a vehicle purchase.
Title and registration fees are fees issued by regulating agencies to have the title and vehicle registration be issued in your name. These fees can include title fees, registration fees, weight fees, plate fees, lien fees, emission fees, district fees, and other regulatory fees as per the location you wish to register your vehicle. These fees vary greatly by state, and can range from under $100 to several hundred dollars, and even thousands over the ownership of the vehicle.
The second set of common fees is those added on by the car dealer for various services performed in the process of selling and delivering the vehicle. All of these fees will be negotiable to some extent.
Documentation fees are the fee charged by the dealership to perform the work necessary to get the car titled, registered, and licensed. This fee is usually under $100 and is negotiable. There is no fixed or unavoidable cost to the dealership associated with performing this service as the dealership must perform the service in to sell and deliver the vehicle, with few exceptions.
Market adjustments are surcharges placed on rare, desirable, or otherwise hard to get vehicles. You will never need to pay this if you shop smart as this markup is an aspect of basic supply and demand. As demand rises, dealerships can charge more for the vehicle in question. The best way to avoid market adjustments is to wait for the demand to subside or travel to a dealership that does not add market adjustments to their vehicles.
Transportation fees and destination charges are two different things. Some dealers will add on a transportation fee for any variety of reasons, some of them legitimate, some of them not. If you requested that a dealership locates a specific car for you and they had to have the car delivered from another dealership some distance away, it's possible this fee is a legitimate expense. However, if the vehicle is already on the dealership lot, the fee may not be completely necessary.
Dealer prep is the fee charged to 'prepare' the vehicle for delivery. It is recommended that you simply refuse to pay this fee and do not negotiate. Dealer preparation of vehicles is an expected cost of doing business. You should not have to pay extra when this cost of doing business is figured into the dealer profit on the purchase price.
Although it is becoming increasingly rare, some dealerships will load up a car with additions and add-ons and charge very large fees. These add-ons can be anything from fabric protector and undercoating to pinstriping and styling accessories. Usually, the price you pay for dealer-installed options is significantly more than you would pay to have these services performed on the aftermarket. Unless you specifically request an add-on from a dealer during the negotiation phase, it is recommended to avoid vehicles with excessively priced dealer applied additions.
Finance fees are markups to the financing as arranged by the dealer. This fee can be difficult to spot as it is often rolled into he interest rate of the loan. The best tactic to avoid this fee is to arrange financing before walking into a dealership.
Any time you see the words surcharge, fee, assessment, payment, commission, expense, honorarium, recompense, toll, or interest on a sales contract you should question it. Other processing and miscellaneous fees can be charged and are legal as long as you accept them by signing the contract. If a dealership cannot prove to your satisfaction that a fee is legitimate, negotiate the fee or refuse to pay it.