You’re in the homestretch at the car dealership (you’ve probably been there for hours). You’ve negotiated the selling price on the car, and you’re now daydreaming about driving away in your shiny new car, enjoying the new car smell while you wait for the dealer, who finally hands you the contract. As much as you’d love to just sign on the dotted line and hit the road, now isn’t the time to put your guard down. Unless you negotiated the “out-the-door price,” the price you negotiated is not the final price you will see on the sales contract. There are several legitimate dealership fees you’ll need to pay, but you’ll need to know which fees are questionable. So stop daydreaming about your ride home, grab a protein bar and a cup of coffee, and get ready to comb through that contract carefully.
Dealership Fees to Look Out For
As a rule of thumb, any fee that shows up as a line item on the factory invoice is a legitimate fee that you should pay and cannot be negotiated. So you should ask the dealer to see the invoice and compare the fees listed on your sales sheet with the fees listed on the invoice to make sure they match. As an added precaution, you may want to make sure the VIN numbers match on the sales sheet and on the invoice before you start comparing fees. Fees that the manufacturer charges the dealer, are generally passed on to the consumer, and should be paid. However, you shouldn’t pay fees that are part of the dealers’ cost of doing business. Here are a few fees you should look out for:
Administration Fees: Generally, this is a fee that consumers should not pay and should ask the dealer to remove. There are rare instances, however, when a car manufacturer does charge the dealer an admin fee, which may be due to some legislation in a particular state, such as parts cost reimbursement for repairs under warranty, but this is the exception and not the rule. Defer to the rule of comparing the factory invoice with the sales sheet. If you see an admin fee as a line item on the factory invoice, it is a legitimate fee. If you’re still suspicious, you can tell the dealer that you know this fee isn’t a standard and you would like an explanation.
Floor Plan Fees (or Flooring; Floor Plan Assistance Fees): This is the cost a dealer pays for holding cars in their showroom. This is a cost-of-doing-business-fee for the dealer and should not be passed along to you. Do you pay Best Buy a fee for the computers they hold on the floor or the computers in boxes in the back? Nope, kindly have the dealer remove this.
Vehicle Preparation Fee: This is literally the cost of preparing the vehicle so you can drive it off the dealer’s lot. The dealership basically washes the car for you and removes the plastic from the seats. Yes, someone has to be paid to do this work, but it’s part of the business of selling cars and you shouldn’t be the one to pay for it. Ask the dealer to remove this.
Any acronym + Fee: Additional dealer mark ups, i.e. (ADP, or ADM) in the form of confusing acronyms. A dishonest dealer will attempt to slide these through to increase their profit on the deal. These fees will often be presented on a sticker and placed next to the manufacturer’s sticker price. Be wary. Be very, very wary.
It’s the end of a long day of at the dealership and the dealer knows you’re ready to close the deal and get out of there, and will often use this to their advantage to slip in these illegitimate fees. Stay strong and be prepared to walk away from the deal if any of these illegitimate fees are on the invoice and the dealer refuses to remove them. One way to prepare yourself is to ask the dealer which fees you will be charged for at the beginning of negotiations, or better yet, have them scan or fax it to you before you go into the dealership. If something doesn’t make sense, question it. A dealer who is unwilling to answer your questions, is one that you should walk away from.
As mentioned at the beginning of this article, there are many legitimate fees, and on top of knowing what those fees are, we also suggest you have an understanding of what you should expect to pay for each of the legitimate fees, so that those fees don’t get padded. For instance you were told that the documentation fee was $100 at one point, and now it’s written in as $250. You should also look out for duplicate fees with different names. For example, you were charged a legitimate destination fee and it appears on the invoice, but you were also charged a D&H (delivery and handling) fee that’s not on the invoice. This is the same fee charged twice. At the same time we want you to keep in mind that you don’t want to give the dealer a hard time for a legitimate fee and should know when to pick your battles. Being knowledgeable and prepared before going into the dealership can save you hundreds, if not thousands of dollars.
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