What are dealer fees?

Imagine you just had a test drive in the car of your dreams and you’re full from those free donuts the dealership gave you. As you admire your soon-to-be car sitting outside the dealership’s window, your attention is diverted to a stack of papers. All you have to to do is sign, but after a closer look your final price is hundreds, wait, make that thousands more than the price you saw online.

nash used car dealer pictures

So what do you do? You can try to talk those fees out of the price of the car, but before you do, make sure you know each type of fee before opening up the negotiations and more importantly, how to negotiate with a dealer. Remember, if you don’t understand a fee, you should always ask for clarification.

– Documentation Fees

– Dealer Prep Fees

– Extended Warranty

– Protection Fee

– Advertising Fee

– Destination or Delivery Fee

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What are documentation fees?

dealer document black and whiteSometimes known as processing fees, this incorporates fees that dealerships have to pay to the DMV such as the cost for registering the vehicle or license plates. Dealerships will also factor in the cost of obtaining your credit score and processing your paperwork  since someone’s gotta get paid to do this. Although many of the fees are legitimate, ask the dealer to breakdown the individual fees. Then you can make sure that they add up correctly to the overall “doc fee”.

What are dealer prep fees?

dealer prep fee imageWe all want to drive off the lot in a car that is sparkling clean both inside and out. Dealer preparation fees factor the time it takes to prepare a vehicle for its next owner. A simple detail job this is not. Prep fees can run hundreds of dollars. For a brand new car, not much prep is needed other then a quick rinse and removal of any packaging material (usually just peeling off some body panel sized stickers). If you see a $200 charge to “prep” a brand new vehicle, ask yourself if you’d pay $200 for a car wash any other time. If you wouldn’t, ask the salesperson to remove the extra bill.

What are the types of extended warranties?

dealer warranty fee imageThis fee can be tricky. An uninformed consumer can be easily persuaded to “protect their investment” with a service warranty. New cars come with a manufacturers warranty, but what about used cars? If you’re buying a certified pre owned car, you’ll have an existing warranty. If you’re not buying certified pre owned, buying a warranty from a dealership or insurance company might not be such a bad idea. Take a look at the fine print first, since dealership warranties can be a crafty way to make unprepared consumers feel like they “have to get it” in case “something happens” because “you never know.”

What are protection fees?

dealer protection black and white imageDealers may tack this on to offer an extra layer of protection to cloth seats for a soccer mom or paint for the avid mall-goers. Car manufacturers already account for this when building the car, using interior materials that are resistant to stains and odors. Paint technology has improved, too, offering multilayered paint jobs that resist chipping and undercoating to prevent rust. The protection fees, sometimes costing upwards of $400, might not get you much more than a nice wax job and a quick coat of interior protectant spray. A $5 DIY can of 3M Scotchbrite and a quick hand wax will achieve the same results. You can tell the dealer that you don’t want this service.

What are advertising fees?

black and white photo of kids watching tvYou might see something called the “advertising fee” or “regional advertising fee.” This is the fee that the manufacturer adds to the invoice price of a new vehicle to cover ads like commercials or billboards in the dealer’s neighborhood. For example, in an area with harsh winters, the manufacturer may decide to run television ads with the car plowing through snowbanks, while warmer parts of the country might see ads of cars driving along a beach. When you see an ad fee, make sure it appears in the factory invoice and make sure it doesn’t pop up again as an additional charge. Additional advertising fees other then the one charged by the manufacturer are usually negotiable. If you’re buying a used car, make sure to ask why an advertising fee is in the invoice at all.

What are destination and delivery fees?

black and white photo of old delivery truck carsThis is a fee you can expect to see on the purchase of a new car anywhere in the United States. Essentially this is the charge to have your car shipped to the dealer from the manufacturer. Every time you see a truck carrying shiny new cars down the highway, that’s what this fee is for. It’s government mandated and required that each customer is charged the same amount regardless of how far the car has been shipped. Savvy dealers will sometimes tack on a “delivery fee” which sounds the same as a destination fee. In reality, if you come across a charge for a “destination” and “delivery” fee, you are probably being charged twice for the same service. If you see it twice, ask the dealer to remove one of the charges. If you are buying a used car, you should definitely ask about why you’re being charged a delivery fee if it appears on your invoice.

Another thing to remember is MojoMotors.com will let tell you if a dealer has additional charges on an asking price. Beneath the “Vehicle Information” section on a vehicle’s page is the “Dealer Disclaimer.” We include this disclaimer if the price you see on the page isn’t really the whole price.

While buying a car can be stressful, it is good to remember thousands of people buy cars each day. If they can do it, you can do it! If you don’t like the details and you don’t love a car, don’t sign any paperwork and simply walk out of the dealership.

Ready to take the next steps? These other articles might help.
What to know before buying a used car
Car reviews by make
Car reviews by body style

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Written by Johncarlo Pecorari
Image credits: VW Vortex