“The price you see is the price you pay” said every car dealer ever at some point. That isn’t really the whole truth because a price tag that might fit comfortably within your budget doesn’t factor in the taxes and dealer fees. Once those costs are added into the final price, you might be thousands over budget! See how much extra you might be paying in your state below.
And these aren’t the only fees you’ll face either. We’ve listed out the six most common dealer fees here since each dealer approaches fees a bit differently. For the purposes of the this study and the infographic above, we honed in on state and local taxes, registration fees and dealer documentation fees. The costs were calculated based on a used car listed for sale at $16,500. That’s about the average price for a 2011 Honda Accord, one of the most followed cars on MojoMotors.com.
So what are state and local taxes, registration fees and dealer doc fees? Here’s an explanation of each.
State and Local Taxes: These bad boys will not only haunt you at the grocery store, they will also show up when you purchase your vehicle (unless you’re in Delaware, Montana, New Hampshire or Oregon). Sometimes as high as 9%, these taxes can tack on enough to the final price that might make you reconsider buying a car. In our evaluation, we included the average local sales tax, which can vary within each state.
Average Registration Fee: This is the cost of registering the vehicle, obtaining license plates and obtaining a title in each state. Some states charge around $20 for this process, while others can go as high as $600.
Average Dealer Documentation Fee: This is the fee dealerships may charge to process the paperwork. This covers the cost of filing, copying, processing, etc. In some states this fee is capped by law, but in others it is not. Some dealers take liberties with this fee, so as a result a dealer documentation fee can range from $0 to $600.
In our assessment of an average vehicle on Mojo Motors, we found that in the most expensive states, namely Alabama, Arizona, and Colorado, taxes and fees accounted for 14% of the listed sales price of a car. In contrast, the least expensive states like Oregon and Alaska, their taxes and fees accounted for 1% and 2% of sales price, respectively. The average amount of total fees was about 8.7% for all 50 states.
Some of you might look at this and think, why wouldn’t I just buy from the cheaper state nearby? Well, it’s not so simple. You will have to pay taxes in the state that you wish to register the vehicle, not the state where you actually purchase it. Therefore, buying a car in a state with lower sales tax, but registering in your home state will not save you any money. Nice try, slick.
Although this study didn’t account for every fee possible, these three fees have the most significant impact on the final price. Remember, dealer doc fees can sometimes be negotiable and you might benefit from studying up on 8 negotiation tips to use at a dealer. When it comes down to it, buying a car revolves around 3 factors: Location, Location, and LOCATION!