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Watch Those New Car Fees

Author: Daniel Jackson

The last time you purchased a new car, did you analyze the fees before signing on the dotted line? It's not uncommon for consumers to ignore the fine print. In fact, many make a purchasing decision without considering the total amount they'll spend over the life of the loan. If the monthly payments are affordable and the car salesman agrees to a certain asking price, they're in. However, there is an assortment of fees you want to steer clear of or negotiate down to keep your costs low.

Dealer Fees

These are the costs incurred by the dealer to prepare the vehicle for the showroom. Some dealers also assess an Additional Dealer Markup [which] appears on the sticker next to the MSRP and is an artificial fee added by the dealer as a buffer for negotiation so the dealer can make a larger profit, notes CarsDirect. If these figures exceed more than a few hundred dollars, that's your cue to look elsewhere, as it shouldn't take more than a quick detail job to get the car prepared for sale.

Registration Fees

In order to legally operate the vehicle, you must pay to have it registered to you. There's also a title transfer and license fee that you'll have to remit directly to the dealer, so the company can file the required documentation with your state's Department of Motor Vehicles (DMV). Contact your local DMV office to confirm that the amounts being assessed by the dealer are accurate.

Documentation Fees

You will also be responsible for the documentation fee, or doc fee, which is the sum of expenses incurred by the dealer to complete and file the sales contract and any additional paperwork associated with the purchase. According to only 10 states place a ceiling on the maximum amount you can pay.

If you do not reside in any of these states, the fee assessed is at the dealership's discretion, the article adds. To get an idea of how much you should be paying for doc fees, refer to this comprehensive chart from If the amount you're being quoted is substantially higher, request a lower fee or take your business elsewhere.

Advertising Fees

Manufacturers charge dealers an advertising fee that may be passed on to you. But if the fee on your sales contract is higher than the fee on the manufacturer's invoice, negotiate the amount or ask the dealer to absorb the cost.

Miscellaneous Fees

These include VIN etching, delivery and emissions-testing fees. If your car is manufactured outside of the U.S., you may also incur a port prep fee for options installed at the port. The good news is that these fees are negotiable and can be waived if the dealer is motivated to make the sale.

State Sales Tax

Anytime you purchase a new car, your state's tax office wants its cut – no exceptions! Several states also collect sales tax on cash rebates. However, if you live in New Hampshire, Oregon, Delaware or Montana, you're off the hook, although Montana and Alaska allow localities to charge sales taxes. And don't forget the trade-in sales tax, which is based on the difference between the purchase price of your new car and the amount received for your trade-in.

The Bottom Line

While it's important to determine the affordability of a new car based on the monthly payment, you should also confirm that the fees are reasonable. Otherwise, you will spend much more for your next vehicle than you initially anticipated.

If you aren't familiar with a particular fee, be sure to ask the dealer before moving forward with the purchase. (For more, see How to Get the Best Price on a New Car and When Is the Best Time to Buy a Car.)

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