Car Dealer Fees: What You Should Never Pay When Buying a Car

September 7, 2020
Written by: Zach Shefska

Buying a car isn’t easy. Figuring out what vehicle you want: hard. Negotiating a fair price: challenging. Understanding all the car dealer fees that are added to your final buyers order: infuriating.

Unlike nearly any other purchase, buying a car is full of gimmicks, tricks, and fees. Why? It may have something to do with the fact that dealerships have operated in this way for over a century now.

In modern society, few purchases are more important, as well as complicated, as buying a car. On top of existing pressure from the salesperson, and the weight of making such a hefty purchase, confusing fees and taxes can make car buying incredibly stressful. Maybe one day buying a car will be as easy as ordering something from Amazon, but until then, our hope is that we can help you better understand what fees and taxes, both legitimate and illegitimate, you should expect when buying a car.

Knowledge is power, and after reading this short guide, you should feel more confident understanding what car dealer fees are, and which you should be able to negotiate.

Legitimate car dealer fees

When it comes to making your purchase, understand that the total price of your car (what we frequently refer to as the “out-the-door price”) is made up of a few components. There are legitimate fees and taxes you need to pay to purchase your vehicle, and those fees make up the out-the-door price.

State & local taxes

Buying a car comes with a whole host of taxes. These include city, state, and county sales tax, personal property tax, and often a vehicle license tax, which has to be paid annually. These all vary from state to state, and in the case of sales tax, in even smaller jurisdictions. Our free out-the-door price estimator will help you get a sense for how much tax you’ll owe on the purchase of a vehicle.

Title, Tags, and Registration

In addition to taxes, there are a handful of other legitimate fees that are imposed by your local government. Title, tags, and registration fees are all par for the course when purchasing a vehicle.

The title fee is charged as a cost for the documents required to transfer the title, the cost for this fee can range from $4 up to $150 depending on the state.

Registration fees, charged to cover the cost of registering the vehicle under the buyer’s name, can vary wildly. Some states charge a flat fee, some charge based on weight, while others charge based on how old the car is. Our free out-the-door price estimator will help you get a sense for how much your state’s registration fees will be.

Tag fees relate to the physical plates you need to carry on the vehicle. Again, this varies from state to state, but know it is another fee you should be prepared to pay.

Doc fee

Doc fees straddle the line of legitimate and illegitimate. Know that you can and should negotiate the doc fee with a car dealer. Also know that the dealer will never actually remove the fee from your buyer’s order, instead they will reduce the selling price of the vehicle by the same amount as the doc fee.

Doc fees are simply a profit center for the dealership. It’s a fee that is meant to offset the cost of non revenue producing employees at the dealership. It’s … bogus. But, dealers will tell you they legally can’t remove the fee from your purchase order, and this is true.

There are legal cases where dealerships have been sued for removing doc fees for some customers and not others. Doc fees are here to stay, for better or worse.

Doc fees change from state to state and from dealer to dealer. Many states cap doc fees to prevent dealers from exploiting them. For example you’ll never see a doc fee of more than $85 in California, whereas in Florida you’ll frequently find dealers charging upwards of $1,000 for a doc fee. In some states it’s the wild west.

If you haven’t used it already, I highly recommend using our free out-the-door price estimator. We aggregated doc fees (and other fees) from each state so that you can get an estimate as to what your total out-the-door price will be before going to the dealer.

Non-Legitimate car dealer fees

Nitrogen fees

The idea behind this fee is that the dealer will, for a healthy fee, fill up your tires with pure nitrogen gas so that they stay full longer due to the size of the nitrogen molecules. Surprise, surprise, this is barely true. Regular air that you would get from just about any tire pump is already 78% nitrogen, and Nitrogen is only 2.7% bigger than oxygen, which makes up almost all of the rest of the air. The additional nitrogen does almost nothing to help the life of the tires. 

If a dealer is trying to get you with a $195 Nitrogen tire fee, politely let them know you won’t be able to pay for that.

Reconditioning fee

If you’re purchasing a used car you need to be wary of this fee. When car dealers purchase used vehicles they recondition them to get them “showroom ready.” Reconditioning entails mechanical inspections, detailing, and more. Recon, as it is commonly referred to, is simply a cost of doing business for a car dealer.

If you’re looking at purchasing a used car and the dealer has added an additional reconditioning fee to the purchase price, you should walk away. This is not a fee that you should pay for, this is a cost the dealers imply incurred in getting the car retail ready.

Additional Destination fee

When a dealer buys a new car from the manufacturer they pay the invoice price for that vehicle. Included in that invoice price is a destination charge. This destination charge shows up on the monroney sticker on the vehicle.

If you’re purchasing a new vehicle that has an additional destination fee of any kind, that is bogus.

If you’re purchasing a used vehicle that has any destination fee, that is bogus.

The destination charge is legitimate, but only if there’s one destination charge. The original destination fee is built into the MSRP of the vehicle and you can see it on the original window sticker. Any other destination charges are purely an attempt to make money off of you.

Cash up-charge

If you didn’t know, car dealers make most of their profit on the “back-end” of a car deal. The back-end comprises finance and insurance profit, aka marking up your car loan or selling you expensive warranties. Some dealers, when they learn a customer is going to pay with cash, instead of finance through them, will up-charge them. This is an entirely bogus fee.

As we’ve discussed in many videos and blog posts, negotiate the out-the-door price of the vehicle, and then discuss how you plan to pay for the purchase.

CarFax or AutoCheck

If you’re engaging with a reputable dealer, there is no reason why you should have to pay for a CarFax or AutoCheck report. Dealers pull these reports already, so simply ask them for one, and they should be able to supply you with it.

Are dealer installed accessories a legitimate car dealer fee?

Not a fee, per se, but another line item dealers add to the purchase price of your vehicle, dealer installed accessories are a major profit center for new car dealers. Typically dealers will install accessories such as door guards, Lojack, window etch (and more) to a vehicle when it arrives at their showroom. Generally speaking, no mention of these accessories will be made while you’re showing interest in the vehicle. Only once you look at the final numbers for the price of the car will you become aware of $1,000+ in accessories that have already been installed on the car.

Your salesperson or sales manager will say, “I understand you don’t want x, y, and z installed on the car, but they’re already there … I can’t take them off.”

Can you negotiate this “fee?” Absolutely! Sales managers do not expect every vehicle they accessorize to sell for full price. This tactic to boost dealer profit works on a lot of people, but you don’t have to fall prey to it. If you aren’t interested in the accessories, negotiate them off of the selling price of the vehicle. It isn’t easy, but it is entirely within your right to do that.

Not sure where to begin?

Take a look at our curated 'Start Here' resources or explore and ask questions in the community forum

25 Comments

  1. thomas gili

    good stuff.thank you

    Reply
  2. Al

    More info on lease deal ‘s

    Reply
  3. Robert Palombo

    Love your analyses, Zach

    Reply
  4. Brianna Cowles

    How can you justify the negotiation of additional installation fees to be taken off the purchase price? If it’s installed already, and they “can’t take it out/off”, and I don’t want it in/on the car, what do I tell them?

    Reply
    • Zach Shefska

      Brianna, we recommend asking for them “at cost” instead of at the retail price. That’s usually a good middle ground.

      Reply
  5. Scott

    A doc fee is not legitimate, period. Those fees do not straddle the line between legitimate and illegitimate. It is a FAKE fee.

    Dealers sell at a price. Price includes all dealer costs plus profit or loss. The minor costs associated with documents is a dealer cost. Hence, those minor costs are part of the price.

    There is no legal reason why a car dealer must charge a doc fee nor is there a legal reason a dealer cannot remove a doc fee. The inclusion of doc fee or the non-inclusion of a doc fee is solely a decision by the dealer. When a dealer states they cannot remove the doc fee what they are saying, as noted, is their attorneys have advised them removing the fee from a contract risks being sued by people who paid the fee.

    Regardless of whether the dealer includes the fee on the contract, they buyer as no legal obligation to pay the fake fee. The smart buyer will reduce the price by the amount of the fake doc fee.

    Why supposed consumer advocates drift to suggesting or stating doc fees are legitimate is a disservice to car buyers.

    Reply
    • Peter OBrien

      Depending on the state doc fee is legal, some state doc fees are regulated such as NY state, supposedly cannot charge more than $75 for doc. states like NJ are unregulated so they can (and do) charge what ever they want.

      Reply
    • Brent Butler

      This is correct. I’ve never paid a Doc Fee. How did I do that? When I see it written down, I take out a pen, cross it off, and say, “I don’t pay Doc Fees”. If they start to give me guff, I get up and walk away. Typically they are eager to drop the car’s price by that amount to keep me on the lot.

      Reply
  6. Perry Rease

    After viewing your very helpful and valuable video on fees, am I to understand that when buying a USED vehicle, I should negotiate the fees AFTER settling on a price or before? And should this negotiation be with the salesperson or the finance/insurance person? Thanks for your assistance. Cheers!

    Reply
  7. Jim Catlette

    What is the best way to find the dealer invoice? Love the videos keep them coming… jimcatlette557@gmail.com

    Reply
  8. JOE MARTIN

    Yrs. ago that was called ” writing up a sale,, DOC FEE IS A SCAM. Dealer said ” i cant remove the doc fee,, I said ‘ SURE YOU CAN, YOU PUT IT IN THE COMPUTER.,I said ‘ YOURE MAKING $250.00 OFF OF ME EVEN B/4 I SIT DOWN AT THE TABLE. I said, see ya’ later,, and left..Funny that that law was made to help the dealers? How about a law that say, ALL DEALERS MUST give a 30 day warranty on used cars.? ThaT WAY DEALERS CANT pawn OFF THE JUNK CARS ON THE BUYERS. Also, its the LAW that if you ask a dealer who had the car before you, he MUST tell you. Dont let that thief say, cant tell you because of the privacy law. One tried that crap on me until i showed him on paper that he MUST tell mew who had the car b/4 i buy iit. ALSO, DEALERS CANNOT, CANNOT sell a car that not safe to be on the road., like bad frame, brakes, etc,,yes thats the law too. ALSO if you buy a car and dealer doesnt have the sticker in the window,, HE CAN BE FINED. ALSO if dealer lies about the price of the car on the TITLE, he can lose his license.[ fraud ] Yes, i looked all this up. DO NOT FALL FOR THE ” CAR SOLD AS IS CRAP ‘” Especially if dealer knew brakes/ frame was bad. After i got the name of the previous owner b/4 i bought car. he told me NOT to buy the car, which i didnt..

    Reply
  9. Elizabeth Zarilli

    I have a dealer charging me “Accessories Fee” of $800. Because of what the car has. Is this a real fee? THANKS!!!

    Reply
    • Zach Shefska

      If it’s taxable … it’s negotiable! Push back on this “fee” please!

      Reply
    • Diane

      What is a cost of compliance fee? And , should I have to pay it when buying my used car. I asked what the Services Fee was and they told me it was for cost of compliance.

      Reply
    • Peter OBrien

      No it’s a fake fee. tell them your not paying it.

      Reply
  10. Aaron

    Should I pay a Government Fee of $103.50? I live in Ohio. Only other fee was the proc/doc fee of $300.00.

    Reply
    • Peter OBrien

      What is the “Government Fee”? is it a tax, a luxury tax? The only true fees are state fees and they are called TAXES, such as state tax, luxury tax, some states might even have an a tax for vehicles that over produce or put out too much emissions due to state emission laws, but that is mostly commercial vehicles and large heavy duty trucks.

      Reply
  11. Lynn

    very useful info, thank you very much!
    I went to a car dealership last week and they showed me the “reconditioning fee 1.8k” + ” cash up charge 1.9k” to push the selling price up to sky for a 2018 model. While I did not know these non-legitimate fees, I felt the price was too high for the car, so after a lengthy negotiation , I walked out of the store without any regret, the sale manager was very pushy and rude too. I feel more confident to deal with car purchasing next time after reading your article.

    Reply
    • Peter OBrien

      You did good Lynn, if you feel uncomfortable, just walk out. “Reconditioning” should be done anyway to make the car ready for sale, it’s part of the cost for the dealership, what are they gonna do sell unreconditioned vehicle? Nobody would buy them! Who is gonna buy a filthy, unclean, UNSANITIZED!, car especially in the time of Covid-19!

      Reply
  12. Mark

    “There are legal cases where dealerships have been sued for removing doc fees for some customers and not others.” Do you have case cites for any of these legal actions? If so, please provide them for me and I will look them up to see if the plaintiffs were successful in their lawsuits. Let me know. Thanks.

    Reply
  13. Lindsey

    AZ dealerships love to charge a “window tinting fee.”

    1) How do I know if THEY actually did this (vs the used vehicle already having them)
    2) In this case this really is something they can’t remove (if in fact they did it), but how do I determine what “at cost” is?

    Reply
  14. Rebecca j Haras

    Thank you for the great advice! I just got the run around with a dealer after spending way too much time just to be told I would have to pay an additional 2K in extra fees.

    Reply
  15. Jeff

    After I decided to purchase my used vehicle, the dealer tried to apply a $600 fee for some type of coating they applied to the surface of the vehicle that supposedly lasts for 5 years. Totally unable to know if it was legit or not, but I got them to cut it in half. It was not in the advertised price. Was this legitimate to add when not part of the advertised price?

    Reply

Trackbacks/Pingbacks

  1. How Do I Know If I Got A Good Deal On a Car? - YAA - […] You should also feel comfortable pushing back on unnecessary and egregious fees. We explain what fees you should and…
  2. 3 signs you should walk away from a car deal - YAA - […] written about legitimate and illegitimate car dealer fees in the past, but it’s worth restating them here. Specifically stay…
  3. Success Story: Dana - YAA - […] Know what fees you should & shouldn’t pay: Car Dealer Fees: What You Should Never Pay When Buying a…

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