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Destination charge

Destination charge is a term every car buyer should know. Bankrate explains what it is.

What is a destination charge?

A destination charge, also called a delivery fee, freight fee or transportation fee, is the fee that an auto manufacturer charges the customer to deliver the vehicle from the factory to the dealership. The dealer does not include this in the ticket price.

Deeper definition

Unlike with the sale price of a vehicle, a buyer can’t negotiate the destination charge and must pay it even if he picks up the vehicle directly from the manufacturer at the factory instead of at the dealership. In most cases, the destination fee is a flat fee that the manufacturer arrives at by calculating the average cost for shipping a vehicle, based on both the farthest and closest dealership for the manufacturing plant. Destination charges typically range from $400 to $800.

The destination charge covers only the cost of shipping the vehicle within the United States. If the vehicle comes from a manufacturing plant in another country, the additional charge of shipping from overseas is factored into the manufacturer’s suggested retail price, or MSRP.

There are some exceptions to destination charges, specifically when a customer buys from an overseas manufacturer such as BMW, Volvo or another imported brand. The manufacturer may offer a discount for buyers who travel to the manufacturer’s country to pick up the vehicle. This discount is typically capped at a certain percentage of the vehicle’s total cost and may include expenses such as ground transportation to the plant and the cost of insurance while driving the vehicle overseas before returning home.

The U.S. government requires manufacturers to charge a destination fee, which is applied before taxes, so that sales tax is charged on the destination charge also.

If you’re thinking of getting a new car, use Bankrate’s auto loan calculator to determine your monthly car payment.

Destination charge example

A few decades ago, an auto buyer could travel to the manufacturing plant and pick up the vehicle instead of at the dealership, which eliminated the destination charge. However, this fee is now required, regardless of where the buyer picks up the vehicle. When a customer buys a vehicle, he pays this flat fee, in addition to the total cost of the car.

Looking for a car loan? Don’t make these five car loan mistakes that cost you money.

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