What Fees You Should (and Shouldn’t) Pay When Buying a Car

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Mandatory fees when buying a new car include sales tax, registration costs, and documentation and destinations fees.
New car fees might seem daunting (and very expensive!), but you can often negotiate your way out of some of them.
To help you understand what’s mandatory and where there might be some wiggle room, car insurance comparison app Jerry is breaking down the fees that you should and shouldn’t pay when buying a new car.
And once the car is yours, you’ll definitely need car insurance. Jerry can help you save there, too, with competitive quotes from more than 40 top insurers. Jerry will finalize your new policy and even cancel your old one for you—and it’s completely free to use!
Now, about those pesky fees…

Mandatory fees when buying a new car

While you can haggle down or barter your way out of many fees, some are simply unavoidable. You will often have to pay these fees, regardless of the car or dealer.

Sales tax

Yup, sales tax applies to cars, too. How much you’ll pay in sales taxes depends on how much the car costs and what state you’re registering it in.
The good news is that if you’re trading in a vehicle, you pay a lot less tax. Rather than being taxed on the cost of the new vehicle, you’ll only pay taxes on the difference between the new car and the trade-in.

Registration costs

The dealer will likely register the car for you, which saves you a trip to the DMV. But since it costs money, they’ll pass that fee onto you.

Documentation fee

Dealers charge “doc fees” to offset the cost of writing up the sales paperwork. While you might not be able to avoid this one, you may be able to haggle it down. Doc fees vary between dealerships and states.

Destination fee

If the car you’re buying isn’t on the dealer’s lot, they have to transport it there—and that costs money. Hence, the “destination fee.”
You’ll only have to pay this if the car is still in the factory. It’s easy to avoid destination fees by buying cars that are already at the dealership.
Key Takeaway In most situations, you’ll have to pay sales taxes, registration costs, and documentation fees on your new vehicle.
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Fees you shouldn’t have to pay when buying a new car

Of course, there are lots of other fees that dealers can try to sneak into your contract—and most people don’t question them. Here are some fees that you might be able to avoid.

Dealer fees or “dealer prep”

Dealer fees cover the cost of getting the vehicle ready for you—but that’s included as part of the mandatory destination fees. If you see this on your invoice, you can definitely try to challenge it.

Advertising fees

Dealers may ask you to pay for some of their advertising, which can range from hundreds to thousands of dollars depending on the vehicle. This isn’t your responsibility!

Dealer add-ons

If a dealer added new equipment to the car, like tinted windows, they may try to charge you extra for it.

Anti-theft measures

The dealer may add features to deter thieves, such as etching your VIN into the car or by adding new alarm systems.
Also keep an eye out for so-called “features” like paint protection or fabric protection. These additions do very little for you, but dealers sometimes charge high fees for them.
Key Takeaway You might be able to successfully challenge costs like dealer and advertising fees to reduce the overall cost of your vehicle.

How to handle fees

If you’re reading this article, you’re already thinking carefully about the fees you should and shouldn’t have to pay, which is the most important step. Understanding the fees before you visit the dealer is the best way to set yourself up for success at the negotiating table.
If you see an unknown charge or hear a salesperson mention a new fee, be sure to ask and find out if it’s really necessary.
Here are some steps to help you handle potentially unnecessary fees at the dealership.

Find out about local fees

Know how much you should expect to pay in fees when buying a new car in your state. Edmund’s has a handy fee chart that outlines the typical car-buying fees by state. You can also ask around at rival dealerships to find out what they charge.

Set a budget

It helps to have a firm budget in mind before stepping foot in the dealership. If you know you can’t pay any more than $20,000 on the car, you’ll be in a better bargaining position. You’ll be less likely to be talked into paying more for extra features.

Negotiate prices

Whenever you can, ask if prices can be brought down. Find out why each fee costs what it does, and see if you can get the dealership to discount it.

Ask about fees—often

You can avoid unnecessary fees by asking early on about what the dealer will charge you. This is also a good opportunity to find out what other dealerships charge and to compare prices.
A dealership with affordable cars but excessively high fees could end up costing you more than you’d pay at another lot.
Avoid supplemental stickers Some dealerships will add a second sticker—usually next to the price sticker—for add-ons and markups. Ask for those stickers and add-ons to be removed, or avoid those lots altogether.
Key Takeaway Ask early and often about fees and bargain when you can. Have a firm upper limit to what you’re willing to spend.

Finding the best car insurance for your new ride

Getting a good deal on your car means nothing if you end up in an accident without insurance. The best way to protect your investment is to purchase adequate insurance coverage.
The free Jerry app lets you compare insurance rates so that you can get the coverage you need at a price you like. It takes less than a minute to sign up, and you’ll never have to handle any paperwork or make phone calls.
The average Jerry user saves $879 per year on car insurance!
“I normally see ads and don’t really pay attention any further than a swipe or scroll—but since I am in the process of buying my first car, I found Jerry very helpful. It was a process that took less than 24 hours to complete. I also heard back sooner than going into an insurance company, along with narrowing my options down to what I found to be a reasonable company and payment for auto insurance. Thanks again!” — Jerry user
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What new car fees should you pay?

No matter what, you’ll have to pay sales tax, registration fees, and documentation fees on your new car. If the car is being driven to the lot for you, you’ll also have to pay a destination fee.

Are dealer processing fees negotiable?

Some fees are negotiable, some aren’t. Any fee going to the dealer itself—like destination or documentation fees—might be negotiable. The dealer probably won’t budge on sales taxes or registration fees, since these are being charged by the state.

How do you avoid dealer fees?

The key to avoiding extra dealer fees is common sense. Ask about extra charges early in the process and haggle when you can. Having a set budget for your new purchase will firm up your bargaining position and help you avoid going over budget.
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