What I’m about to say may sound foolish, but it’s true. When it comes to buying a car, knowing how much you are going to spend is more difficult than it might seem. Getting access to the out-the-door price (an industry term for the total cost to purchase a vehicle), is absolutely necessary, but many car shoppers don’t know to ask for it.
Unlike buying a pair of tennis shoes or groceries (where the price you see is the price you pay), car dealers and local governments add in many additional fees to the purchase of a car, drastically increasing the total “out-the-door” price.
For many car buyers, the assumption is that the price on the window sticker is the price you’re going to pay. And, if I hadn’t spent 43 years selling cars, I would think the same thing too. Unfortunately however that couldn’t be further from the truth.
When it comes to buying a car you need to be familiar with the concept of the out-the-door (or sometimes also referred to as the “on-the-road”) price. This is the price that includes the selling price of a vehicle, taxes, title, registration, doc fees, and any additional dealer add-ons or accessories.
We’ve taken the time to build a simple and free calculator that will estimate the out-the-door (OTD) price for you. All you need to do is enter in a selling price and your state. We’ll then tell you what the estimated out-the-door price is, and what percentage more that is compared to the original selling price. As you’ll see, it’s usually quite a bit, and in some cases it’s as much as an additional 10% on top of the selling price of a vehicle.
The components of an out-the-door price
Imagine you were buying your groceries and when you went to checkout the cashier told you that the strawberries were $4, but that the container they came in was an additional $1, and there was a “grocer fee” for stocking the strawberries of an additional $.25. Your $4 strawberries just became $5.25 strawberries.
If that was reality, you’d probably be pretty frustrated with the grocery store. “Why didn’t they just advertise the price as $5.25, instead of $4.”
Welcome to the world of buying a car! Dealerships for decades have advertised prices for cars that simply aren’t true. The total cost to purchase a vehicle is its out-the-door price, and the components that make up an OTD price are as follows.
The selling price of a vehicle is the first piece to our “out-the-door” puzzle. The selling price is the amount both parties (customer and salesperson) have agreed to in order to make a transaction happen.
For example, if you see an SUV online listed for $39,900, and you contact the dealer and negotiate the price to $37,750, that would be your agreed to selling price.
This is not the total out-the-door price.
In most states (with the exception of Delaware, Montana, New Hampshire, and Oregon) your purchase will be subject to sales tax. Sales tax is calculated on the zipcode level, because in many locales there are state sales taxes and then also county sales tax. There are also some regions that charge an additional vehicle tax (Arizona, for example).
Every dealership has software that allows them to calculate what the total tax amount will be on your purchase. Ask the dealer for this amount, as it is the second component of our out-the-door price. Even if you are buying a car out of state, you can still have the dealer run your taxes for your home state, most have the software to do that.
If you’re purchasing a car in the United States, and you want to own it legally, you need it to be titled in your name. Each state charges a fee when you request a title. Although it is usually nominal (in most states just a few dollars), it is another charge you need to be aware of to calculate your total out-the-door price.
Keep in mind that our free Out-the-Door Price Estimator will tell you what your state’s title fee is. I recommend referencing that when you review what the dealership shares with you.
Another fee from your state government is the registration fee, which is a charge to register your vehicle in your name. Registration fees vary greatly from state to state, with some states charging a flat fee, and others basing their charge on the weight, age, or even horsepower that your vehicle produces.
The registration fee typically includes license plates (sometimes referred to as “tags”). There should not be a separate “tag” fee in most states.
A dealer fee that is never disclosed until you ask for the out-the-door price is the documentation fee. This fee is a pure profit center for dealers, but one you’ll be hard pressed to get them to remove.
Doc fees are not mandatory, but all dealers charge them. In many states they are capped (for example in California the doc fee is capped at $80, while in other states like Florida, doc fees can be well over $1,000. Each dealer sets their own doc fee amount, and it is a major contributor to your total OTD price.
Frustratingly, many dealers add accessories to their inventory and then try and sell those to their customers. For example, if you’ve ever had a dealer tell you “We installed LoJack on this vehicle, and that will be an additional $695,” or “We tinted the windows, so that’ll be $995,” you’ve experienced a dealer trying to upsell you additional accessories.
These may not be included in the price you initially negotiated, but they absolutely will be in the out-the-door price.
How to use the out-the-door price
Now that you know what makes up the OTD price, it’s important to understand how to effectively use it.
When you negotiate the price on any car deal it is important to ask the dealer for the OTD price. Many dealers will list their lowest price so that they show up on the first page of websites like CarGurus and Autotrader, but then they’ll surprise you with massive doc fees and other accessories.
A dealership that shows up as a “bad deal” on CarGurus might actually have the better OTD price, and for that reason it’s always of the utmost importance that you focus your negotiating efforts on the out-the-door number and nothing else, since the internet price is really BS.
I wish I was kidding, but this is the sad reality of the industry, the price simply isn’t the price.