The many horror stories regarding used car dealerships make it necessary to pay close attention to the list of fees often added to the sale price of a vehicle. Some of these fees are legitimate, government charges that dealers will have little to no control over. However, in many cases dealers will use added fees as a creative way to add additional cost onto the purchase price. It is a good idea for car buyers to familiarize themselves with the fees a dealer may require them to pay before they involve themselves in the car-buying process.
The Need for Dealer Fees
Dealerships are in business to make money, and most people have no problem with the fact that the main goal of a car dealer is turning a profit. However, it is just as important for car buyers to learn as much as possible about the car-buying process to protect themselves from paying more than is necessary for the cars they wish to own.
With the exception of tax, title and registration, car dealerships don’t need to charge additional fees. Business expenses like salaries, building maintenance, health care, and other costs associated with overhead can, and arguably should, be accounted for within the stated price of the car. However, many times dealerships will use additional, last-minute charges to add costs onto what initially seemed like a great deal. Presenting these costs after the price has been negotiated and agreed upon can put the customer in a difficult situation of having to accept these late charges or walk away from the deal, something many are not inclined to do.
There are some fees that traditional dealerships must charge to their customers. These fees are typically required by the government and would be paid by the customer buying a car regardless of where it was purchased.
- Tax, Title, and License Fees
Tax, title, and license fees are also known as registration fees. The money for these fees goes straight to the government and will differ depending on the part of the country you call home. Title and license fees cover the cost of transferring ownership of the vehicle to the car buyer. The dealer will register the license plates for the customer and provide them with temporary tags. The dealership takes care of these registration issues for you so that you do not have to make a trip to the Department of Motor Vehicles.
As many customers learn the hard way, some dealers will search high and low for ways to increase the profit margin they enjoy from the cars they sell. Many times, this search can lead to fees described as “questionable” at best.
• Dealer Documentation Fees, “Doc Fees”
Car dealerships charge customers to print and complete the paperwork necessary to finalize an automobile purchase, including the final sales contract. Some states put a limit on the amount of dealer documentation fees charged while others don’t. These fees can vary greatly, and you often have little leeway as far as negotiating a better price for them.
• Advertisement Fees
Advertising fees are passed onto customers by some dealers. These fees sometimes raise suspicions among car buyers, and while it could be argued that these costs “are standard,” it’s hard to find another industry where the costs to advertise the product are added as extra charges at the time of sale. However, consumers should understand that these fees are not legitimate and could easily have been accounted for within the advertised cost of the car.
• Dealer Preparation
Dealers will sometimes try to recover the expenses for preparing a car for sale while padding their pockets a bit with dealer preparation fees. Many industry experts and savvy car buyers feel this fee is unwarranted due to the understanding that preparing a product for sale is included in the cost of doing business for an auto dealer.
• Additional Dealer Markup
This fee is exactly as it sounds; it is simply additional money a dealer decides to pay themselves for selling a car. Some dealers will even include this fee on the final invoice provided for the vehicle purchase. Anyone purchasing a car or truck should make sure that all fees charged to them are traced directly to the vehicle they are buying or to the services and add-ons attached to the vehicle.
• Floor Plan Fee
This fee is to offset the cost of maintaining a vehicle at a dealership. Many dealerships secure the cars they sell through the use of credit. The longer these cars remain on the lot without being sold, the more the price increases. Many people who pay attention to the auto industry feel this fee represents another cost of doing business for the dealership, costs that should not become the responsibility of the consumer.
Negotiating Dealership Fees
You should request an invoice as soon as you agree on a price with a dealer. It is then time to examine the invoice line by line to ensure an understanding of each charge listed for the purchase.
You should not be afraid to ask any questions they may have about the invoice. It is the right of consumers to understand where their money goes when they make purchases. The dealer may use someone else to negotiate any terms with which you are not in agreement. However, do not let this intimidate you. Arm yourself with all the information you can, and stick to your guns when the double-team begins.
The final point to remember throughout the negotiation is that you always have the option to take a stand and walk away. You are spending your money, and there is a dealer available who will not inflate the cost of the car you want to purchase with excessive fees.
Many car buyers become resigned to the fact that paying fees for the opportunity to purchase a car is a simple fact of life. The truth is, it is possible to eliminate most fees from the purchase process. The person who is willing to take the time that is necessary to educate himself or herself regarding dealership fees is likely to save a fair amount of money when purchasing their next automobile. The same is true for those who search for another dealer who better suits their needs when the first dealer is insistent on charging unnecessary fees.