The Destination Fee Keeps Car Prices High

Lisa Steuer McArdle
· 4 min read
Buying a new car is usually an exciting experience. Upgrading to a new set of wheels usually means new car features, increased safety, and better
gas mileage
While driving a
new car
is fun, the
car buying
process can be a bit more stressful. One of the most dreaded things is hidden fees and costs, like the ambiguous "destination fee." Here is what you need to know about this annoying surcharge.
Costs like the destination fee means buying a car can get even more expensive.

Destination fee not included in the MSRP

Most people expect there will be some hassle when buying a new car. Mainly negotiating financing and the final sales price. However, the destination fee is non-negotiable as a separate line item from the final MSRP.
Supposedly, the destination fee is the cost it took to deliver the new car to the dealership. This is what dealerships may tell you.
However, according to
, this may not be the case. Their report found that car buyers in Detroit and Alabama still had to pay over $1,000 in destination fees despite being only a few dozen miles from the manufacturing plant. It seems destination fees are little more than a trick to add more costs to consumers.
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It's getting more expensive

Unfortunately, this problem has only gotten worse in the past decade. According to
Consumer Reports
, the average destination fee in 2011 was $839. In 2020, it was $1,244. That's about 2.5 times the rate of inflation.
Adding to the problem is that different dealerships will use different names for this fee. Sometimes it is described as a "destination charge" or "inland freight and handling fees." Whatever the fee is called, there is little to no explanation of how these costs are calculated.
These fees haven't gone unnoticed by consumer advocacy groups. David Friedman, the vice president of advocacy for Consumer Reports, was quoted as saying, "If they (automakers) had a valid reason beyond just driving up the price, they would actually be able to point us toward specific examples of costs that have gone up within the shipping process."
Consumer Reports has tracked data amongst major automakers to see which is the worst offender. While all domestic manufacturers are guilty of gouging destination fees, the worst offender is Stellantis. Stellantis is the parent company of Chrysler, Dodge, Jeep, and a few other brands. Stellantis raised destination fees by 50% in a three-year period.

What car buyers should do

There's not much a consumer can do to avoid this fee. It is more or less mandatory and should be considered when factoring in the total cost of a car.
What a consumer can do is be prepared and know it's coming. Whatever the fee may be called, it is typically viewable on the car window's sticker. They are generally right below the total MSRP.
Destination fees are normally a little over $1,000. While the fee can't be negotiated, the final MSRP can be. Try to haggle with the dealer on the MSRP to compensate for the destination fee.
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