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What are the Fees When Buying a Car?

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Car fees can be costly when buying a new or used car. The bottom line doesn’t often include the fees associated with the purchase of the vehicle. For this reason, knowing about car fees could save you hundreds of dollars.

Auto Repairs Are EXPENSIVE


There are plenty of fees to consider when purchasing a new or used car, but some of the most commonly questioned are those of the dealer.


Often car buyers write off these fees because they seem so insignificant when compared to the thousands of dollars that go into the vehicle. 


Consumers, however, are warned that these fees count. 


The fees generally come from costs associated with documentation, title, registration, or taxes.


It’s frustrating to see a list of random fees itemized on a report, but buyers should remember that many of these fees are charged by a third party (like the government). The dealer just “passes them on.”


Knowing this fact could help you better negotiate the total cost of your new or used vehicle, though. Sometimes asking about the fees gets the dealer to drop their profit a little bit, saving you money.

What are Dealer Fees when Buying a Car?

Buying a car brings up a lot of concerns about money, especially when it feels like you’re being charged unnecessary service fees in the transaction.


There are some dealer fees that must be paid, though. They simply cannot be avoided in some cases.


HINT: Question or complain about these fees to see if the dealership or seller will knock a few bucks off the total cost for you. Sometimes they will cut into their own portion to close the sale if the fees are holding the buyer back. It’s worth a shot!


One of the most typical fees paid is “title and registration.” It’s because the state requires motor vehicle registration (license plate, car title, etc.). These fees cannot be avoided! If you are upset about the fees, you should contact your state legislators.


Another forgotten government office, the municipality, could be charging a tax. The state may as well. Either way, taxes can’t be avoided except by legal changes. 


Ask if your state will adjust the amount of tax required based on the trade-in value of your vehicle (if trading one in).

Other Dealership Fees

There are other dealership fees that might surprise first-time car buyers. 


Destination fee: the buyer is being asked to pay the cost of getting the car from the factory to the lot. It’s more likely you will be charged this fee when buying a brand new car or a custom model. If you buy from a lot and have it transported, expect to pay for it unless advertised as a free service.


Processing fee: sometimes called a “documentation” or “handling fee,” this conveyance fee is an administrative add on from the dealers. They want to bill the buyer for the paperwork and the receptionist who answered the phone. Some jurisdictions limit how high this rate can be.

Negotiating Dealership Fees when Buying a Car

You can negotiate some dealer fees when buying a car! It only hurts your bottom line not to try.


Shopping for a car often starts with the fun part, looking at the inventory on the floor and taking a few rides for a test spin. After you’ve selected which car is going home with you, you’ll be whisked away to the finance office (F&I) to close the deal.


The staff in this office will help you look for a loan if you don’t already have one ready to go. Many people find their own loans because they can get a better deal by contacting their insurance company, a credit union, or their local bank.


Tackle all add-on costs with negotiation tactics. Ask what the fee is. Then, ask if there’s a way to remove those fees. Tell the dealership you’re feeling uncomfortable with the “total cost.” Be prepared to walk away if the situation becomes unfair or surpasses your budget.


Don’t pay for advertising fees, by the way. That’s a cost of doing business, not a cost of you purchasing the car. Do the same for “dealer preparation fees.” If you’re buying a brand new car, why are you paying for a car dealership car wash?

Should I Buy Extended Warranties or Maintenance Plans?

The short answer is maybe. In general, maintenance plans can be helpful if they cover all the tasks normally associated with owning a vehicle (oil changes, tire rotations, brake pad replacement, etc.). However, extended warranties usually leave consumers unhappy.


Extended warranties don’t please people because they often have a lot of restrictions and very often go unused. They’re also pricey.


The average lifespan of a car is 12 years. Most major problems on a new car are covered by recall. When you do the math, the chances of you cashing out on this expensive policy feels like a high bet.

What is a VIN Etching Fee?

If you’re sitting at the car dealership reviewing the finances and you observe the “VIN Etching Fee” as an option, think twice about shelling out the cash for it.


First of all, VIN etching is recommended. By having the car’s vehicle identification number (VIN) posted on the car’s glass, you can help ensure it isn’t easily stolen.


If you want to do a fun DIY project, you could drop by the auto parts store on your way home and grab a kit to do the same job for under twenty dollars. This is a convenience fee rather than a major necessity, but for some, it’s worth it.


There will be plenty of “after-market upgrades” when you buy a car: tinted windows, fabric protection, burglar alarms, customizations for the trim or paint job. Sometimes this can be worth it at the moment, but many consumers save money by shopping around.

Do Car Dealerships Sell Insurance?

Every car dealership is different, but some do offer selected insurance policies.


For example, some dealerships offer credit insurance. Although you can’t fight them on the price, you can decline it. It helps cover the difference on the car loan should you be in a wreck the insurance company doesn’t pay off. In terms of risk management, it’s a decent idea.


Don’t let anybody talk you into life insurance while you’re buying a car. It isn’t really part of the deal!


Gap insurance, on the other hand, should be considered. This is often required when leasing a vehicle. It’s like credit insurance in that it covers the difference between what the insurance company would pay and the dealer’s quoted value of the car.


Some agreements require it, so read the fine print before signing.


If you know about the fees and taxes that are typically charged before you go to buy a new or used car at the auto lot, you can do your homework to prepare yourself for the negotiation. The fees may seem insignificant at a glance, but they certainly add up!

How Much Does it Cost to Buy a Car?

The cost of buying a car depends on many factors. There is the value of the vehicle, taxes, and fees. If you negotiate well, it could cost less. If you have to outbid another interested buyer, you may have to pay more!


Taxes and registration fees are one of the most common complaints received when negotiating car loans. What happens is people expect to pay the sticker price posted on the vehicle (or the negotiated value), and the price soars when the other feeds are tacked on.


Be careful at this moment, because these fees aren’t as pricey as the big ones, like “extended car warranties” or “maintenance repair plans.” The best advice is to request that the finance office outline each and every fee on your behalf. From here, start the discussion.


When buying a car, especially a used car, you may have to pay for a vehicle inspection. In general, this fee should be paid to somebody outside of the dealership. 


Only a third party can give you an honest review of the car. It’s a small price to pay to save thousands down the road.


Speaking of reliability and risk, it's important to include car insurance fees in your budget. You may think you can afford a car that has X for the car payment each month, but does that include insurance? Does it include fuel costs? Parking? City stickers? Failure to plan is planning to fail.


Insurance can be paid monthly, quarterly, semi-annually, or annually. Be sure you will have money to pay for the required amount of auto insurance so that you’re not left walking the town while your new car sits in the driveway uninsured.


Although not technically a dealership fee, another cost to consider is that of the auto loan itself. Banks don’t (usually) give auto loans out for free. They charge interest and other fees to support the transaction. Shop around for a car loan so that you don’t get taken for a ride.

How to Negotiate a Car Price

Bartering about car fees can be nerve wracking for the inexperienced. For those interested in paying less on fees when buying a car, they should learn what not to say…


For example, don’t walk in and declare your love for any year, make, or model in particular. The agent will use this adoration against you, making the purchase emotional instead of financial.


You don’t have to admit your weaknesses either. It may seem like a good idea to tell the salesperson that you don’t know about cars, but why would you? That gives them a leg up. Instead, act like an expert and use a smartphone to answer questions in the bathroom.


Don’t tell them what your trade is right away. If they can get an idea of the trade-in vehicle, they’ll use that information to plot how much profit they can make off your sale.


Be careful with money as well. You don’t have to tell them your budget, and you really shouldn’t. They will try to make you surpass that number. 


If you really have a budget of $25,000, you may tell the agent you only have $17,000 and see what happens.


We hate the idea that everybody who sells cars is slippery. That’s certainly not the case. There are plenty of respectable car dealership sales staff members who are honest and fair. They just love to see happy customers drive away in a new ride.


That being said, we have to protect ourselves as consumers. Knowing about the industry, and being prepared to advocate for ourselves, is an important part of ensuring that you don’t pay more than market value for a new or used vehicle.

How to Avoid Paying Vehicle Fees

If you really hate paying for gasoline, insurance, and car dealership fees, there’s a simple solution: don’t own a vehicle.


Today, it’s pretty easy to get around many parts of the nation using your feet, a bicycle, public transportation, or ride sharing services. If it makes sense for you, you might consider sending that old car to the junkyard once and for all.


They will pay you cash for the vehicle instead of you being the one to pay vehicle-related fees yet again.

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