What Are Car Buying Fees?

Car buying fees sound a little deceptive. You find a good car. You negotiate the price. You’re happy. The dealer’s happy. Then the dealer starts writing up the deal. The paperwork slides across the laminated tabletop, and the dealer asks you to sign. The number on the paper and the price you negotiated are different.

 Huh?

 How did this happen?

The explanation begins with the sales tax then moves onto the registration fees. Those seem understandable. Any retail business operating legitimately must pay some kind of sales tax. The registration fee looks legitimate too. Every car needs plates recognized by the state. The registration must be valid. That makes sense. The sales tax and the registration fees are fixed by the state. The dealer cannot alter those amounts, and if you want the car, you will have to pay them. Those things are required and are not car dealer fees; just simply are car buying fees. But then comes a long and odd list of charges that the dealer tacks onto the deal. Now things become interesting.

The explanation of the additional charges continues with the Destination Charges and the Documentation Fees or “Doc Fees.” The Destination Charge represents the shipping amount from the factory to the dealership. In most businesses, the shipping charges are reflected in the retail price of the item, but not so with the sale of the car. Most businesses include transportation costs in their overhead expenses and deduct the amount from their taxes as part of its cost of doing business. With the sale of the car, the dealership can figure shipping costs into its price of doing business, but they also make the shipping charge separate so that they may control the amount.  The destination charge may or may not accurately reflect the actual cost of transporting the vehicle.

The Doc Fees refer to the salesperson or a secretary entering the data into a computer and printing up the documents. We all know how much effort and time are required to type in a person’s vital statistics and print up a receipt. If financing is involved in the car sale, more paperwork, with its own fees, usually from a separate financing arm, will apply. The charges on the final tab keep mounting up. And you thought you were just buying a car until all of these car buying fees started adding up.

The remainder of the fees comes from the imagination and the attitude of the dealership. In some cases, if they can get away with charging you for a preparation fee (to wash the car and to pull the plastic covers off the seats), an undercoating fee, a dealer mark-up fee, or if-the-buyer-is-gullible-enough-to-pay-it fee, he will happily charge it, happily justify it, and happily expect you pay it. These car dealer fees are really no more than a means of re-establishing the car’s purchase price.

Other than the sales tax and the registration fee, all car dealer fees are negotiable, and they depend on your skills as a bargainer and the dealer’s nerve in holding the line. You can ask for these car dealer fees to be reduced or waived. You may do your best, but ultimately the dealer will say the car you want, on this day at this time, comes with these car buying fees, perhaps reduced but still applicable, and if you want the car, you will have to pay a total of the price and the car buying fees.

It is here that you must decide if you love the car enough to sign on the dotted line and pay the dealer’s stated cost of the car buying fees or if you can walk away from the table. The dealer gambles that you have fallen too deeply in love with the car and too far into the deal and will see things his way. Usually he wins.

When purchasing from a dealership, car buying fees are part of the landscape. Like fancy wheels and upgraded sound systems, car buying fees are another means for a dealership to generate revenue. Also, like fancy wheels and upgraded sound systems, they fall into the negotiations of a vehicle purchase. They may be reduced, but never will they be eliminated. If you want a new vehicle with a warranty, if you want the backing of factory authorized service, if you want that new car smell, expect to pay almost all of the car dealer fees to the buy the car.