Car Dealership Fees to Avoid

When you’re on the hunt for a new car, your initial focus might revolve around determining your budget or the down payment you can comfortably make. But are you factoring in dealership fees? It’s crucial to be aware of the extra car dealership fees to avoid that dealerships could sneak into your final bill when the time comes to seal the deal and drive off with your new vehicle.  

List of Car Dealership Fees to Avoid 

Before you make that exciting new car purchase, it’s wise to ensure that the dealership provides transparency regarding these possible fees. Being informed about these charges can help you make more informed decisions and potentially avoid unexpected expenses.  

Delivery Fees 

When you’re in the process of purchasing a vehicle, one fee you should be aware of is the destination fee. This fee represents the amount dealers pay to transport the car to their dealership. Typically, this is one of the car dealership fees to avoid that dealers don’t waive, so it’s wise to factor it into your budget.  

However, some dealers might add an extra delivery fee instead of the destination fee, essentially double-dipping. In such cases, you have the right to question and request the removal of this additional fee, as it may seem excessive. It’s all about ensuring transparency and fairness in the car-buying process.  

GAP Insurance 

GAP insurance, or Guaranteed Asset Protection, is a safety net. It covers the shortfall between your car’s current value and the potential cost of replacing it in the unfortunate event of a total loss, such as a severe accident. However, this is one of the car dealership fees to avoid. 

While the dealer may propose including GAP insurance within the overall vehicle purchase price, it’s prudent to explore alternative options before committing to this fee. Shopping around can help you discover potentially more cost-effective alternatives.  

Pro tip: Before purchasing a car, take the time to research and compare car insurance options. This can save you money and provide insights into the varying insurance costs associated with different car models. Making informed decisions about both your car and insurance can lead to substantial savings in the long run.  

Dealer Preparation Fee 

It’s not uncommon for dealers to tack on a preparation fee to the price of a vehicle, whether you’re purchasing a new or used car.  

However, this is one of the car dealership fees to avoid that you have room to negotiate or even have entirely removed. Preparing the car for delivery, which typically includes tasks like a thorough car wash or removing packing materials from the seats, is standard practice and should not necessarily incur an extra cost to you.  

By discussing this fee with the dealer, you can reduce your expenses when buying your car. It’s all about ensuring transparency and fairness in your car purchase.  

Advertising Fee 

Dealers often claim an advertising fee is necessary due to the expenses they incur to promote their inventory and attract customers.  

It’s worth noting that advertising and marketing costs are standard operational expenses for businesses, including car dealerships. Many companies absorb these costs as part of their operations without passing them on to customers. Don’t hesitate to discuss these fees with the dealership and inquire about the possibility of having them waived since this is one of the car dealership fees to avoid.  

Documentation Fee 

The documentation process during a car purchase can be overwhelming. Still, it’s crucial to remain vigilant for any additional charges, such as a documentation fee, that dealers may attempt to include.  

Dealers are well-versed in handling the necessary paperwork, and a documentation fee that merely covers their routine administrative tasks can often be viewed as an attempt to extract additional funds from buyers. Staying aware and questioning such fees is a prudent approach to ensure a transparent and fair transaction.  

VIN Etching Fee 

A VIN etching fee is designed to cover the cost of dealers etching your new car’s VIN, or vehicle identification number, onto the windows and windshield. Dealers often present this service as a means to discourage theft since potential thieves would need to replace the windows before reselling the stolen vehicle.  

While it can be a valuable option if you reside in a high-crime area or if your insurance provider mandates it, it may not be necessary otherwise. This is one of the car dealership fees to avoid if the circumstances do not warrant it.  

Tire and Wheel Protection 

Dealers may propose an additional protection plan for your tires and wheels to cover expenses in case of incidents like running over a nail or encountering a pothole that necessitates tire repair or replacement.  

Before you make your way to the dealership, assessing the cost of this protection compared to the potential out-of-pocket expenses for tire-related issues is essential. Sometimes, the protection plan may outweigh the possible repair cost, making it a financially sound choice. However, it’s necessary to evaluate the specifics of your situation to make an informed decision. This could be another car dealership fees to avoid.  

Avoiding Unnecessary Upgrades 

Beware of dealers charging you for superfluous upgrades, such as window tinting or filling your tires with nitrogen.  

Take the time to carefully review your paperwork for any unexpected upgrades that you didn’t request. It’s also good practice to research the pricing of these options independently before committing to them. If you consider this ass one of the car dealership fees to avoid, you might discover that the desired upgrades can be obtained at a more affordable rate elsewhere.  

Key Protection 

People can easily misplace or lose their keys, and the replacement cost for modern key fobs can be notably higher than that of traditional car keys.  

Before agreeing to pay extra for key protection, it’s essential to inquire with the dealer about the potential key replacement cost. Purchasing a new key may be a more cost-effective solution should you ever lose one. Weighing the options can help you make a financially sound decision regarding key protection.  

Extended Warranty 

It’s common for dealer service departments to propose extended warranties as part of the purchase package. These warranties typically come into play once the manufacturer’s standard warranty expires, typically spanning 50,000 miles or 80,000 kilometers. They primarily cover powertrain repairs but often exclude bodywork, tires, and routine maintenance. Additionally, they hold no value if you decide to sell or trade-in your vehicle before the standard warranty concludes. Therefore, this is definitely one of those car dealership fees to avoid. 

Dealers may try to charge as much as $2,000 for this add-on service. However, it’s essential to note that purchasing an extended warranty at the time of car acquisition is not obligatory. You can opt for one directly from your vehicle manufacturer before the original warranty expires. This approach offers the advantage of being redeemable at any garage certified by the automaker. This will then provide flexibility and potentially more cost-effective options.  

Sales Taxes 

While technically not classified as a dealer fee, sales taxes are a significant expense accompanying new vehicle purchases. The exact tax rate varies from state to state, but the average hovers around 7 percent. Sales tax is calculated after all other charges, meaning it’s a percentage of your total vehicle cost. For instance, if your vehicle costs $30,000, you’ll be looking at an additional $2,100 in sales tax. This is then not subject to negotiation.  

Tax write-off incentives may be available, particularly for electric vehicles. Additionally, if you’re trading in an older car, the value of your trade-in can often be deducted from the sales tax. This will then substantially alleviate the overall cost. It’s also essential to know that not all states impose sales tax on vehicle purchases. New Hampshire, Delaware, Oregon, Montana, and Alaska are the five states where you won’t find the car dealership fees to avoid.  

Manufacturer Rebates 

In car purchases, manufacturers occasionally entice buyers with factory rebates. They can use this to promote the sale of older models or slower-moving packages. However, it’s crucial to learn that these rebates do not directly discount the vehicle’s price at the dealership. Instead, they stem from the manufacturer and typically contribute toward the down payment for the car. You might still be subject to sales tax on the rebate amount. Although the taxation process can vary depending on your state regulations.  

Consequently, a manufacturer’s rebate does not inherently impact the core price of the vehicle itself. Essentially, the automaker extends a financial contribution to the dealership, reducing the sticker price. This understanding is valuable when you negotiate, as it underscores that the dealership incurs no direct cost for the rebate. Vehicles offering rebates are often particularly motivated to clear from their inventory to make room for fresh stock.  

Dealer Markup Fee  

A dealer markup fee is often applied to vehicles deemed rare or in high demand in car sales. It’s a practice that can undoubtedly frustrate customers. In fact, certain manufacturers have implemented policies to discourage dealers from resorting to it. In the case of highly desired sports cars, we’ve witnessed markups soaring to astonishing heights. Sometimes increasing to as much as $50,000 above the sticker price.  

When confronted with a dealer markup, it’s crucial to recognize that negotiating it down may prove challenging. Dealers establish such pricing based on the belief that buyers are willing to handle it. While it can be tempting to accept the markup, it’s better to be patient and consider if this is one of the car dealership fees to avoid. Waiting until the inventory for that specific vehicle increases helps stabilize the market and lower the price. Additionally, contacting other nearby dealers might uncover a more favorable offer for your dream car.  

Final Note  

Before finalizing your car purchase, thoroughly review your paperwork to identify any potential additional fees that might be tacked onto your total cost.  

Equally important is your willingness to negotiate with the dealer to seek the removal of these car dealership fees to avoid before signing on the dotted line. If the dealer is unwilling to cooperate, remember that you can walk away from the deal. Your preparedness and determination can make a significant difference in securing a fair and transparent deal.