You’ve done your homework, narrowed down the cars you want to look at, and maybe even started looking at nailing down your financing. Perhaps you even feel ready to head into a dealership and start getting down to brass tacks. When you head to the dealership to purchase a new or used car, you expect a fairly straightforward, what-you-see-is-what-you-pay experience. Right? You probably even expect to pay no more than what you see on a window sticker, too.
Unfortunately, you’ll be in for an unpleasant surprise when it comes time to sign on the dotted line. That’s because dealerships for both new and used cars have a number of added dealership fees that they tack on to each transaction for things you don’t need and may not even want. We here at Instamotor strive to make your new-to-you, car buying experience as easy and clear as possible so we thought we’d get into the nitty gritty of sometimes hidden, often expensive, and mostly unnecessary, dealer fees. Here’s what to watch out for and what you can and can’t negotiate when it comes to dealer fees.
Dealerships have to cover the cost of basic things like building and office maintenance, salaries, health care, and simply keeping the lights on. It's important to understand that purchasing a car at a dealership costs will often cost more than purchasing a car through a private seller (or through Instamotor). Dealerships have to pay for their physical infrastructure. All those cars on the lot, they take money to maintain. The building? Costs money to heat and cool. Those costs get passed onto a customer when they come in to purchase a car and often times they can add a good chunk of change to the cost of a car.
There’s also the fact that dealerships also exist to make money. Where do they get that money from? Your pocket. When you come into a dealership to purchase a car you can expect to pay anywhere from $1000 or more just to cover a dealership’s profit margin. That’s because the dealership has to make money and pockets that cash. It’s a business after all and it should make money for providing extra services like a certified inspection or a reconditioning.
Don’t get us wrong, dealerships deserve to make money but, if you are looking for the best way to save cash when purchasing a used car, it’s best to know what the real game is. For more about why dealership used cars cost more, check out my other article, here.
There are some fees that dealerships charge that are negotiable. Items like warranties, underbody coatings, interior coatings, dealer prep, and advertising charges are all negotiable. You are not required to get an extended warranty and it may not cover you for any of the potential big items that could go wrong with a used car. So it pays to pay attention to these and negotiate them. The items you include in your purchase are totally up to you. Don’t let a dealer try to push you into something you don’t want and don’t need.
You should know however, that dealership fees can differ from state-to-state and brand-to-brand.
Like death and taxes there are certain fees that are set in stone and can’t be negotiated. These are generally fees that are enforced by laws and the government and they are required to be paid when you buy a new or used car.
The destination fee is a required dealer fee you have to pay. A destination fee covers the cost of moving the cars from their point of entry into the US or, from the manufacturing plant in the US, to the dealership. The fee shows up on the window sticker as a separate line item, usually at the bottom. Back in 2013 destination fees became mandated by the U.S. government and they don’t vary from state-to-state but they do vary by brand. So be aware whether you are looking at a BMW or a Kia, as the destination fees can and often will, be different.
Also, when you are looking at your final paperwork and all those numbers, make sure you aren’t being charged both a delivery fee AND a separate destination fee. Dealers sometimes get sneaky and try to get both in when only one is mandated by law.
Doc fees usually include DMV fees and registration fees, but the dealer may also include other things like the cost of pulling your credit, and getting all the paperwork in order.
Items like DMV fees and registration fees are set by the state and can’t be negotiated, while the cost of pulling your credit could be. Not sure which doc fee you should pay? Have the dealership break the whole documentation fee down line-by-line so you know exactly what the dealership paid to do the legwork for you. If there is any wiggle room, negotiate, and only agree to pay what the dealership paid out to do the work. Want to know what your state regulates? Visit your local DMV site to find out before you sit down at the negotiation table.
Once you and the dealer have settled on the right price, ask them to present you with the invoice. Go through that invoice line by line to ensure that you understand each and every dollar you are spending on your new-to-you car. Be prepared to go over the invoice with a fine-toothed comb when you get ready to sign on the dotted line.
The first good rule of negotiation is to always read everything you sign. The fine print is important and it can reveal where you may be able to negotiate a better deal.
The second rule of thumb is to ask questions if you don’t understand something. Don’t be afraid to speak up. This is your hard-earned cash. You don’t want to end up blowing it on things you don’t want and don’t need.
Don’t sweat it if the person that you’re negotiating with brings in a manager or another person to back them up. Stay strong in your conviction and stick to your guns, says Autoblog. Be confident and do your homework before you set foot in the dealership. That way if they do try and double-team you, you are armed with good information and ready to strike a good deal.
If all else fails, walk away. There are plenty of other dealers out there who can win your business and who will, more than likely, be willing to do what they can to ensure that you are happy with your purchase. Remember it’s your money. Spend it wisely.
If you want to learn more about car buying terms and some of the potential fees you could be looking at, check out our glossary, here. You’ll find a wealth of information and be armed with pretty solid knowledge when you head into the dealership.
Founder and a car nut. Born and raised from Detroit, Michigan. Val managed 12 dealerships prior to founding Instamotor.