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Michael Belyakov
Michael Belyakov

What Fees Do You Pay When You Buy A Car

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what fees do you pay when you buy a car

You've skillfully negotiated the price of your new car, and with the help of the Edmunds article on Negotiating Car Prices, you're confident that you're getting a good deal. But when you see the contract, the total is much higher than what you planned on paying. Then you see the problem: The contract contains fees you didn't know about. It leaves you wondering if these new car fees really are legitimate.

To answer that question, Edmunds has created a chart with the most common fees you may encounter when you're buying a new car. In addition, we show how different states charge sales tax on trade-ins and rebates. If you've never used the chart before, it's worth reading about the process first. But you also can quickly refer to the fees chart.

Vehicle registration fee: This is the amount the state charges to register a new vehicle, assign a title (legal proof of ownership) and cover the cost of license plates. The dealer provides this service for you, saving you a trip to the Department of Motor Vehicles. Usually, the more expensive the car is, or the more it weighs, the higher the registration fee. Some states are now charging higher registration fees for vehicles that average less than a predetermined mpg. Similarly, there are a number of states that charge more for an electric vehicle's registration. The higher costs are designed to offset the losses the state might receive from gasoline taxes since the EV would not use any fuel.

Documentation fee: Dealerships charge car buyers a documentation fee, or "doc fee," to cover the cost of preparing and filing the sales contract and other paperwork. In some states, the doc fee is limited by state law. In other states, the doc fees are unregulated. Dealerships may sell a vehicle at an attractive price but then add a high doc fee to the contract.

Review the chart below to see how your state handles doc fees. If your state does not limit doc fees, find out early in the buying process what the dealership charges. Most dealerships will not negotiate the doc fee itself, but there may be a workaround. If the doc fee is substantially higher than your state's median, which is listed in the chart, negotiate the car's price more aggressively to offset the fee. And keep in mind that dealers also charge sales tax on the doc fee.

The estimated median doc fees that dealers charge in each state are based on data Edmunds has collected from thousands of dealers nationwide. We've taken the data provided by those dealers, calculated a median fee (the middle of the range), and rounded it up or down to the nearest $5. When you go car shopping, these estimates are a valuable guide to determine if a dealership is charging close to the typical doc fee in your state.

Uncommon dealer fees: Some dealers write additional fees into the contract and give them official-sounding names, such as "S&H," "PDI," "dealer prep" or even "shipping." Find out early what extra fees you will be charged and negotiate accordingly before you sign the contract. As with doc fees, you might decide to go along with added dealer fees if you're saving money on other aspects of the deal. When in doubt about an unknown fee or term, don't hesitate to ask the dealer finance person.

Advertising fees. Sometimes buyers look up invoice prices on Edmunds and find they don't match the invoice price given by a dealer. What's going on? There might be an advertising fee attached to the invoice price of the car. The advertising fee listed on a car's invoice is an actual charge made by the manufacturer to the dealer, and you should pay it. However, some dealers will tack on an extra "unofficial" advertising fee into the sales contract, perhaps claiming they are offsetting the cost of their own advertising efforts. If you encounter this type of fee, you can challenge it or negotiate a lower purchase price on the car to offset the charge.

While this chart helps estimate fees, don't expect that it will allow you to calculate your final cost to the penny. Registry fees in particular are tricky, but DMV websites in many states have calculators to help guide you. Additionally, many states have nominal charges (less than $40) under local environmental laws. Still, this chart will tell you roughly what to expect and help you budget accordingly.

1. Maximum sales tax: Often you pay a combination of state, county and local taxes. This is the estimated maximum tax you should be charged, depending on which city you live in. 2. Average DMV fees: This data is for new vehicles only. These are unweighted state averages. The data is valid as of March 2, 2022. 3. Trade-in sales tax credit? A "Y" in this column means that you will pay sales tax only on the difference between your new car purchase and the value of your trade-in. An "N" in the column signifies that you will pay tax on the full amount of your new car purchase. 4. Are incentives taxed? A "Y" in this column indicates that the buyer will pay tax on the purchase price before the manufacturer rebate is applied. 5. Doc fee limits: This will tell you if the documentation fee is regulated by the state and the maximum allowed amount. 6. Median doc fee: This is the typical amount you can expect to pay for a dealer documentation fee. In this case, we've provided the median amount charged per state, rather than the average, because we think it gives a truer representation of what most buyers will pay.

The final price you pay when buying a car isn't only the cost of the vehicle itself. You'll also pay documentation fees and sales tax. However, you could find additional fees tacked on to the final cost that aren't necessary. Depending on your situation, you may be able to negotiate fees that can reduce the overall cost of the purchase.

The documentation fee covers the cost of preparing and filing the sales contract and other relevant paperwork. Some states place limits on how much these fees can cost. Other states have no limits on how high these fees can go. The difference between documentation fees in states that do and do not limit them can be significant. While some states limit fees to just less than $100, the median documentation fee in some states without such limits can exceed $600.

The three costs listed above are standard mostly everywhere across the country. However, you can challenge or negotiate down some fees when buying a new car. Some dealerships add on fees to increase their profit. The state doesn't legally require these fees, so many dealerships will drop them if you threaten to walk away from the purchase. There are some unique fees when buying a new car that may be negotiated, including:

Don't be afraid to look at different dealerships. If you live in a state where documentation fees have no limit, you may be able to get better prices at a different dealer. Look out for what's known as the "supplemental" sticker. It lists markups and add-ons besides the factory MSRP sticker. If you see a dealership with these stickers, walk away.

Also known as a "doc fee," this is a charge the dealer adds to cover their expenses for getting a license and registration, or gathering the necessary paperwork. These fees can run anywhere from $50 to $600, with some states having a cap on how much a dealer can charge a buyer. Depending on where you live and the dealer, a documentation fee may be negotiable, so it can't hurt to ask.

Reconditioning is one of the most common hidden fees when buying a used car. When a dealer buys a used car, they inspect and run diagnostics on it to discover any maintenance issues. Then, once the vehicle is given the all-clear, they'll clean it to get it ready for the showroom. Some dealers may try to pass this cost on to you as a fee. It's something you can negotiate.

Advertising is another fee a dealer may pass down to you. These are fees associated with marketing the car through ads, website photos, and videos. Many experts contend that advertising a car is simply a cost of doing business for a dealer, so it's a fee that shouldn't be passed down to the consumer. This is another fee you can try to negotiate.

While many hidden car fees are negotiable and can be removed entirely, sales tax is a fee you'll need to pay (unless you live in a state without sales tax). Keep in mind, though, sales tax often isn't listed on the sticker price, so it may come as a surprise to you when you get the final numbers. Most car buyers can expect to pay between 2% and 8%. Look up your state tax rate and run the numbers so you can add it to your budget.

As you're shopping around and comparing prices on the vehicle you want, you may see fees such as window tinting and fabric protection added to the price. Review these optional upgrades to see if you're interested, and if so, compare the price with other local vendors. For example, you may find it's more expensive for the dealer to add window tints to your car.

While it's not a hidden fee at the time of purchase, there's one more thing you should think about when shopping for a used car: research how much maintenance fees and repairs typically cost and how often they're needed. Some cars have higher reliability scores compared to others, and a lot of maintenance fees could add up over time. Ask your dealer about the typical service costs for the car you want so you can have a good idea when reviewing your expected expenses.

When you're purchasing a new or used car, it's important to understand the taxes and fees you may face. California statewide sales tax on new & used vehicles is 7.25%. The sales tax is higher in many areas due to district taxes. Some areas have more than one district tax, pushing sales taxes up even more. To find out the exact tax where you live, use this tool from the Avalara. 041b061a72

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