Dealer fees: What to know and how to avoid them

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Once you negotiate the price of your new car, you may be surprised to see a final sales number that is hundreds, perhaps even thousands, higher than you originally negotiated. The bulk of these additional charges, or dealer fees, are required by law — such as tax, title and license fees. But some fees are completely up to the individual dealer and can be negotiated.
6 dealer fees you can avoid and negotiate
Not every fee a dealer throws your way is mandatory or non-negotiable. Be prepared to reject unnecessary options and haggle the fees on the products you want.
1. Vehicle or dealer preparation fee
Vehicle or dealer preparation fees are extra charges that the dealer adds to get the car ready for delivery. These include washing the car, removing the “bump protectors” from the doors or disposing of the protective coverings for the seats or floor. This can cost hundreds of extra dollars, so it’s worth being aware of.
2. Dealer-installed accessories and extended warranties
These extra items are paid for at the time of sale, but only if you requested them and determined that you are being charged a fair price for the item or service. These items might include a stolen vehicle recovery system — like LoJack — paint sealant or an aftermarket sound system or wheels.
3. VIN etching
The VIN, or vehicle identification number, is the grouping of 17 characters that identifies your car. The process of VIN etching is done for security purposes. It etches the number onto the car’s windows. It can cost between $150 and $300, so it’s wise to avoid this additional cost and handle it on your own. This is one of the easiest fees to avoid, so be sure to be prepared to keep it from slipping through the paperwork cracks.
4. Extended warranty
An extended warranty is an additional fee that can cover potential car repairs once the manufacturer’s warranty on the vehicle expires. But they aren’t necessary for every driver, especially as they can cost thousands of dollars a year. If you are worried about the price of possible vehicle repairs, it may be wise to rethink the chosen vehicle. And if an extended warranty is worth it, shop around instead of blindly going with the dealership’s offer.
5. Gap insurance
Guaranteed asset protection, or gap insurance, is an additional fee that you may be met with if you are leasing a vehicle. It covers the difference between the value of the car and the loan payments if the vehicle is totaled or stolen. Like vehicle insurance, the cost ranges from $500 to $700.
6. Advertising fee
An advertising fee covers the cost that dealers sometimes push based in their cost for regional or national ads. The cost can be quite high depending on the dealer — as much as $1,000 in some cases.
Unavoidable dealer fees
There are also dealer fees that you won’t be able to avoid, but you can prepare for them.
Tax, title and license fees
The title and license fees cover the process that it takes to get a vehicle title as well as the license plate. The price tag attached to the tax fee will depend on your state’s sales tax rate and cannot be negotiated.
Documentation fee
The documentation fee covers the cost of processing all the paperwork associated with a new car purchase and is something you will need to pay. Some states charge a flat fee for this item, typically well under $100. Other states have no specific requirements, so a dealer can charge whatever it wants.
Destination fee
This fee covers the cost that it takes for the dealership to get the car from the factory. Kelley Blue Book notes that these fees can run upwards of $1,700. According to Edmunds, picking up your vehicle at the factory won’t save you the destination charge — you’ll likely still have to pay the full amount.
The bottom line
Although some additional dealership fees are unavoidable, knowing which can be negotiated or removed altogether is the key to saving money when it comes to your next car-buying experience. And before you enter a showroom, do some research and math ahead of time to better understand what car you can truly afford.
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