When buying a vehicle, ensure that you plan for dealer fees as they are included in the car’s sticker price and the final amount you pay. Particularly when purchasing a vehicle at a traditional dealership, there are various types of fees, including those that are mandatory by the state and those that cover additional things and are not necessary. Some of these fees are costs that dealers transfer to consumers and are unavoidable. At Carvana, you never have to worry about paying bogus fees for the vehicle you want, however, it helps knowing which fees are legitimate, as you may end up paying a lot more money than you need to on a vehicle when you buy the old way.
Legitimate Dealer Fees
• Destination Charge
The destination charge is a fee set by the dealer and covers the cost of transporting the vehicle from the manufacturer to the dealership. It is usually listed on the window sticker on the vehicle. This fee is unavoidable—you have to pay for it. This fee is set by the manufacturer, not the dealer, and is relatively standard across all vehicles sold to dealerships.
• Title and Registration Fee
This covers the cost of establishing you as the vehicle’s legal owner and properly registering the vehicle in your state. The state sets the title and registration fee, and you cannot negotiate it. It also saves you a trip to the DMV as most states and most dealerships have the right to take care of the title and registration. The registration fee is determined, in part, by the weight and price of the vehicle.
Some dealers issue temporary tags while others ensure that you have new license plates for the vehicle. They can also assist you in transferring your current plate to your new vehicle. The registration fee varies depending on your state and locality. You can ask the dealer to assist you in registering the car in your own state if you are buying out-of-state to avoid any issues as you cross state lines.
• Sales Tax
Sales tax is a compulsory fee when buying a vehicle; like the destination charge, it is not negotiable. It is payable on the full amount or the buying price minus the trade-in. If you are purchasing a car in a different state, you will pay sales tax after registering in your home state. Sales tax varies from state to state, and you should inform the dealer of your home state to ensure they charge you the right amount.
Dealer Fees You Can Avoid
Some fees you can avoid include:
• Dealer preparation fee
• Dealer markup fees
• VIN etching fee
• GAP insurance
• Credit insurance
• Advertising fee
• Loan payment fees
• Extended warranties and maintenance plans
• Fabric protection and paint sealant
• Rustproofing and undercoating
What Is a Document Fee?
The document fee is also known as a doc fee or paperwork fee. It covers the cost of processing the paperwork relating to the sale of the vehicle, including the filings at the DMV, license plate, checking a trade-in value, sales contracts, and any other paperwork. Whether you get a new car or a used car, you’re responsible for paying the doc fees.
Some states strictly limit the amount the dealer can charge you, but others have no restrictions, allowing dealers to charge different amounts. Some dealerships may sell a vehicle at a low price but add a high doc fee to the contract. Some people believe that the original buying price should cover the cost of documentation, but it’s important to keep in mind that doc fees are taxable—there is a federal law that states dealerships must pay taxes on any revenue received.
You can negotiate this fee by focusing on the bottom-line number. Asking for the bottom-line or out–the–door price, including the doc fee, will ensure that you are not haggling over the exact dollar amount of fees and taxes. Knowing the maximum amount the dealer can charge is essential in advocating for yourself if you feel you are being charged with unnecessary fees.
Documentation fees can range from $0 up to $1,000, depending on which dealer you’re at and which state your vehicle is purchased in. Many states do not have set limits while others put a cap on what a dealer can charge for the doc fee. It is difficult to negotiate for the dealer’s doc fee since the law requires the dealer to charge every customer the same amount. If you purchase your vehicle from a different state, you will be required to pay the fee based on your residence.
The Southeast region has a pattern of charging the highest fees, with states like Florida charging over $600. California has one of the lowest fees, about $50, which is due to the state law that limits charging more than that.
States That Charge the Highest Doc Fees
The states with very high doc fees are generally the ones where there are no cap rules. The states of Florida, Colorado, Georgia, Alabama, and North Carolina have the highest doc fees. The states of California, Oregon, New York, South Dakota, and Arizona have the lowest doc fees.
In Georgia, the dealer has the right to charge doc fees for preparing the paperwork, and usually, the fees are preprinted on the buyer’s order. However, the dealer is required to include all the fees when advertising a sales price online or in print. The state classifies any extra fees during the sale.
Lowest State Fees
California has a limit of $80 on document fees, which are referred to as document processing fees. A dealership may charge $65 if they do not have a partnership with the state to provide on-site registration. Arkansas has a limit of $129 and refers to doc fees as “service and handling.” Businesses are not allowed to ask for a separate documentary fee.
The state of Illinois has a max doc fee of $169, and it is subject to increase each year. Iowa has a limit of $180. Louisiana has a limit of $200 while Maryland has a limit of $300. Minnesota has a limit of $75, Missouri is $199, and New York is $75. Rhode Island has a limit of $200, Washington is $150, and West Virginia is $175.
In the state of Michigan, the limit is set at $210 or 5% of the car’s price, whichever is less. Ohio uses a similar structure, with a limit of $250 or 10% of the sale price, whichever is less. Oregon has a limit of $115 if you file manually or $150 if you file for documentation electronically. The state of Pennsylvania has a limit of $113 when filled manually and $134 when filed electronically.
The following states do not have a set limit on doc fees:
7. District of Colombia
21. New Hampshire
22. New Jersey
23. New Mexico
24. North Carolina
25. North Dakota
27. South Carolina
28. South Dakota
Before you purchase a new or used car, it’s important to be aware of the fees charged by your state so that you know how much you will need to pay.