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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 when you’re presented with 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.  

Dealer fees you can avoid and negotiate  

Not every fee a dealer throws your way is mandatory or non-negotiable. 

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. 

How to avoid: Unless the dealer has done something above and beyond basic preparation, refuse to pay these dealer fees. 

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, an extended warranty or an aftermarket wheels or sound system.  

How to avoid: If a dealer tries to charge you for any of these items and you did not request them, refuse to pay the associated fee. If you did request them, shop around to ensure that you are getting a fair price because you can obtain any of these items elsewhere after you own the car. 

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 so it doesn’t slip through the paperwork cracks.  

How to avoid: Say no to this additional fee and save money by going directly through a body shop for this service. You can even find a DIY kit online for around $20 to $40.  

Extended warranty   

This additional fee can cover potential car repairs once the manufacturer’s warranty on the vehicle expires. But they aren’t completely necessary for every driver. If you are worried about the price of possible vehicle repairs, it may be wise to rethink the chosen vehicle.  

How to avoid: Compare the cost of this fee with the probability that it will actually be used before signing off on it.  

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.  

How to avoid: Unless you have a long loan term and put no money down, this fee is something you should avoid. Pay at least 20% on your down payment to ensure that it’s unlikely for you to become upside down on your loan. 

Legal 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.  

Takeaway: To learn the process in your state, visit your state’s Department of Motor Vehicles (DMV) website. 

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 that is typically well under $100. Other states have no specific requirements, so a dealer can charge whatever it wants.  

Takeaway: What you pay will vary based on your state and the dealer you work with. To get an idea of what’s standard, research local law. 

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. 

Takeaway: This fee cannot be negotiated and will be a hefty part of the bill.  

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. 

Written by
Rebecca Betterton
Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely borrowing money to purchase a car.