When you buy a car there are always those unexpected and budget stretching car dealer fees that cause you to spend a little more than you planned. Some of these car buying costs and fees are legitimate and some are simply dollars being added on to your purchase that are made up by the car dealership. The question is which charges are real and which ones are merely auto dealer scams.
Let’s try to break it down for you into terms everyone can understand. The one charge we always hear about in the automobile advertisements is sales tax. That one is self explanatory and one car dealer fee that can’t be avoided, everybody pays sales tax for their personal vehicles as they would for anything they purchase. One thing about sales tax though is that you don’t pay the sales tax rate of the state or county where you buy the car, you pay the sales tax percentage of the state and county where the car will be licensed (not many people realize this fact).
Standard Car Dealer Fees and Costs
Next on the list is the “Doc Fee” actually great wall motor called Documentation Fee which is really a car dealer fee for processing all your paperwork, documents and contracts. This documentation fee or car buying cost is regulated by the state where the car dealership does business. Many states allow dealers to charge somewhere around one hundred dollars or so, but I have heard of some states allowing the auto dealers to charge as much as $800 or more. Again check with you D.M.V in your state to confirm.
Most neighboring states work with each other and collect the sales tax amount where the car will be licensed. However not all states do this so you may have to pay the sales tax when you license the car in your state and county. Therefore you will not pay the sales tax to the dealer. If you are financing a car out of state the tax will be added on to your contract because the lender wants to make sure the tax gets paid so this is not a car dealer fee but it is a car buying cost that must be paid.
Moving on, the next car dealer fee is title and license, which is also self explanatory. This amount is determined by the state and the auto dealer has no input whatsoever. You can’t avoid this car buying cost. You can find out this amount by contacting your local department of motor vehicles.
Finally some states charge a new car flat tax somewhere in the neighborhood of $20 on all new cars sold which does not matter where the vehicle will be registered. Check with your state to be sure.
Questionable Car Dealer Fees and Hidden Costs
This is where it gets sticky because I have heard stories of auto dealers tacking on all kinds of different car dealer fees. One of the most common is the Dealer Prep Fee. Some dealers add that on every car, new or used that is purchased and tell the buyer it is a standard charge for preparing the car for sale. As for new cars, if you read the window sticker closely you will see that most of them spell out that the price includes dealer prep, therefore charging the customer is really a way for them to collect car dealer fees.
The best thing to do before you end up paying any bogus car dealer fees is to check with your state to make sure exactly what the car dealership is allowed to tack on to your purchase. If the car buying costs go beyond the legitimate car buying fees above you should tell them that you are not paying that charge. Most times they will remove them if they are not required by the state because they want to sell you a car
If the dealership adds on any other car dealer fees you need to question them and decide if you are will to pay the charge. The auto dealer has the right to add things on, but only if you agree to pay them. If you are not comfortable and feel that you are being taken advantage of you should get up and leave. You are the consumer and there are many other car dealers that would love to sell you a car.