Many used car buyers can relate to the joy of finding a car they really want. The negotiations begin, and an acceptable price is eventually agreed upon between the dealer and car buyer. However, with dealer fees, the car buyer may see a much different price on the paperwork once the deal becomes final.
At Carvana, you never have to deal with unsubstantiated “bogus” fees. However, the additional fees assessed at a traditional dealership can quickly change the way you feel about the car you are purchasing. Savvy consumers can protect themselves from this problem by understanding which charges are legitimate when buying a car. You can start with the eight common hidden fees below that dealers commonly add to sales contracts.
1. Dealer Markup
It is not uncommon for dealers to add to the price of a car that is in high demand. This addition to a vehicle’s sale price is known as an additional dealer markup. Many dealers are comfortable enough with this strategy to include the words on a sales contract.
The simple truth is that dealers must make a profit on the cars they sell to remain in business. Dealers also know that most people want to feel that they are getting a deal when purchasing a used car.
Dealers will often reveal a list price for a car that is higher than they will accept for the vehicle. This practice allows the customer to haggle successfully while the dealer enjoys the desired profit margin.
Car buyers can prevent paying an excessive markup on the price of a car by performing a little research. This research will reveal the wholesale price of a car they intend to buy. The Kelley Blue Book Auto Market Report, NADA Official Used Car Guide, and National Auto Research Black Book are a few of the resources that can be used to conduct this research.
Once a buyer knows the wholesale price for the car, the negotiation can begin at that point and not at the inflated listing price on the vehicle.
An extended warranty covers repairs above and beyond any standard warranty offered. The first question a car buyer should ask themselves is if they will actually use the extended warranty. These warranties are only for things that are “broken” on a car. Extended warranties are not used for oil changes, tire rotations, brake jobs, or any other regular maintenance work. A survey from Consumer Reports showed that 10% of car owners who purchase an extended warranty end up benefitting from the protection.
3. Dealer Preparation Fee
The dealer preparation fee is another expense commonly passed on to car buyers. The additional money reimburses the used car dealership for the cost of cleaning and preparing the car for sale. Many consumer advocates consider this an unnecessary expense. These advocates say that prepping a vehicle for sale is simply part of the costs of doing business for a car dealership. Car buyers good at negotiations may be able to talk their way into a price reduction for dealer preparation fees or have them waived altogether.
4. Dealer Documentation Fees
Doc fees compensate the dealership for the costs like registration, title, and other paperwork necessary to execute the sale of an automobile. Many states do not impose a price limit for dealer documentation fees. But it is required in all states for car buyers to pay the same price for these services. This means that the cost of documentation fees is non-negotiable. Savvy car buyers may be able to get the dealer to drop a little from the price of the car to compensate for excessive documentation fees.
Some dealers will take it upon themselves to engrave a car’s vehicle identification number into the windshield and windows of the vehicle. This action is billed as an anti-theft measure and could make a thief less likely to steal a car that they know the police can instantly identify as stolen.
Some dealers will also want to charge car buyers a couple of hundred bucks for taking it upon themselves to complete this engraving. Car buyers may be able to have this price reduced or eliminated by pointing out to the dealer that they did not request this service. Another point to make is that dealers do not spend anywhere near the price they attempt to recoup for the VIN engraving.
6. Unnecessary Add-ons
Some used car dealers have several items they offer as add-ons that add little value to the car that is purchased. However, these additional features can cause the price of the vehicle to rise sharply. Some of the most common questionable add-ons include:
Key protection – Some dealers will show car buyers how expensive it is to replace lost keys. They do so to provide themselves with an opportunity to sell insurance for the set of keys with which the car buyer leaves the lot. This insurance can cost a couple of hundred dollars. It becomes more expensive when added to the financed portion of an automobile loan.
Nitrogen in tires – There are tangible benefits to having the tires on a car filled with nitrogen. The tire pressure is less likely to change when the weather goes from cold to hot and vice versa. Also, nitrogen escapes from the tire at a slower pace than air, so car owners do not have to refill air levels as often. However, most places in the country do not experience the kind of rapid changes in temperature that would make this benefit worth the cost.
Tire, wheel, windshield, and dent protection – Dealers offer a variety of plans that cover the cost to replace external car parts and fix dents. In most cases, car buyers do better for themselves if they decide against these protections. They can pay for these minor repairs out of pocket if needed.
Window tinting – A little tint will prevent the sun’s rays from entering your car and can add to the vehicle’s aesthetic appeal. However, the price of these services can be excessive when performed by the car dealer.
It costs money for car dealers to attract customers to a dealership. And in some cases, the dealer will pass this expense on to the customer in the form of fees. These fees are sometimes negotiable, but their details should become available to the car buyer early in the negotiation process. Car buyers should protest anytime the addition of advertising fees to the final price of the car they are buying happens at the last minute.
8. Disability and Credit Life Insurance
These protections ensure a car is paid for if the buyer becomes disabled or dies before completing the loan obligation. There is nothing wrong with springing for this type of protection. However, you will probably find a better price for this protection elsewhere than the one you will receive from a dealer. Most employers offer this type of insurance, for example, and you could also bundle it in with your auto, home, or renter’s insurance.
The Bottom Line
Many people are so happy with a car purchase that the last thing they want to do is ruin their moment by bothering with the fine print on a sales contract. However, taking the time to do so can save unsuspecting car owners a load of money in unnecessary fees.