Are Car Dealer Fees Negotiable? Tips to Save

Dealer fees, also called documentation fees, are charges tacked on by car dealers during the sales process. These unpredictable expenses can add hundreds or even thousands of dollars to the out-the-door price. Understanding these fees before entering negotiations puts buyers in a better position to reduce costs.

Common Types of Dealer Fees

What Are Dealer Fees and How Much Should You Expect to Pay?

Dealer fees cover documentation, preparation, advertising, and other miscellaneous costs incurred by dealerships. They are separate from the negotiated vehicle price. On average, total dealer fees range from 8-10% of the vehicle's sticker price.

For example, a $20,000 car would typically incur around $2,000 in dealer fees. However, there is no standard amount - charges can vary widely. Expensive luxury or specialty vehicles tend to have higher fees.

While frustrating for car buyers, dealers rely heavily on these fees for profitability. The fees remain mostly fixed overhead expenses for dealers, while sales prices fluctuate. Holdbacks, incentives, and other margins impact the negotiating room on vehicle pricing.

Common Types of Dealer Fees to Watch Out For

The dealer fee terminology differs between brands, but similar charges exist at nearly every dealership. Being aware of the most common fees allows buyers to anticipate and prepare for these costs.

Documentation or Doc Fees

This catch-all fee covers costs of business licensing, accounting, sales paperwork, vehicle titling, and other deal-making expenses. Doc fees are typically the largest single fee, ranging from $200 up to $1000 in some states.

Destination or Delivery Charges

This fee covers the cost of shipping a vehicle from the factory to the dealer. Destination fees are generally $1000-$1500 but can run higher for specialty vehicles shipped longer distances.

Dealer Prep or Get-Ready Fees

Charges for inspecting, washing, and preparing a vehicle for delivery to the buyer. These fees often add a few hundred dollars. Some dealers embed this in the overall doc fee.

Advertising Fees

Dealers recoup expenses of sales event ads and inventory listings by tacking on ad fees. These are often under $500 but still inflate the bottom line price.

Dealer Fees to Avoid

State Regulations Dictate Allowable Dealer Fees

Dealer fees are subject to state laws, which vary widely in terms of transparency and allowable amounts:

• 10 states have no limits on the maximum size of total dealer fees.
• 15 states cap total fees between $200-$1000.
• 7 states have a flexible cap based on a % of vehicle sale price.
• The remaining states have no major restrictions in place.

Regardless of state law, dealers must itemize these fees clearly on purchase orders rather than hiding them in the fine print. But significant fees within state limits remain legal and standard practice.

How to Reduce Dealer Fees When Buying a Car

While dealer fees are rarely avoidable, buyers can employ some tactics to decrease the amounts paid:

Negotiate the Vehicle Price First

Dealer fees are attached on top of the vehicle sales price. The lower the negotiated vehicle price, the lower the relative fee amount.

For example, a $500 doc fee is 2.5% of a $20,000 car but only 2% of a negotiated $25,000 price. Focus negotiations heavily on the vehicle itself before discussing fees.

Request a Reduction in Fees

Many buyers shy away from questioning the validity of dealer fees to avoid confrontation. However, it does not hurt to ask politely for a decrease in the fees or removal of certain charges.

Dealers want to close sales and may bend on fees if it means earning a customer's business. Making this ask after negotiating vehicle price improves leverage.

Use Competition and Walk-Away Power

Having quotes from other dealerships evidencing lower fees reinforces buyers' negotiating position. Dealers want to match or beat competitors.

Remaining willing to walk away gives ultimatum power on fees. But buyers must follow through if dealers call their bluff.

Compare all Fee Disclosures Up Front

Obtaining initial quotes showing line item fees from several dealers makes cost comparisons easier. Negotiate first with the dealer having lower fees. Their desire to beat competitors can lead to further reductions.

Are Dealer Fees Negotiable?

Dealer fees are technically negotiable since they represent discretionary charges added above the vehicle sales price. But some factors make them very resistant to reduction attempts:

• Dealers consider fees a major profit center and push back hard on lowering them.
• Salespeople often claim no control over fees set by management.
• Walking away over fees alone is difficult if the vehicle price is already fair.

Having a competing offer in hand and credible willingness to forego the deal provides the only real leverage over fees. Even then, buyers may only save a few hundred dollars through stubborn negotiation.

Used vehicles typically have more fee flexibility since dealers have more room to adjust pricing. New vehicles usually have strict dealer invoice costs and limited negotiation options.

Dealer Fee Differences Between New and Used Cars

New and used vehicles encounter the same basic types of fees. However, key differences exist between them:

Used Vehicles Have Higher Fees as a Percentage

Dealer fees on a $5,000 used car represent a much higher percentage compared to a new $30,000 model. This makes the relative impact on overall affordability more significant for used vehicles.

For example, a $500 doc fee equals 10% of the used car value but less than 2% for the new version. Even with smaller absolute fee amounts, the percentage inflates used car prices considerably.

More Price Flexibility Allows Lower Fees on Used Cars

Since used vehicles have no factory invoice, sticker price simply reflects what the dealer paid at auction or trade-in. This allows more room to adjust sales price as a trade-off for lower fees.

New cars have fixed invoice costs and factory incentives, restricting adjustments to vehicle price. Dealers rely on fee amounts to turn a profit on new sales.

Shop Around for the Best Fees Based on Value

Used car prices vary widely for the same make and model. Comparing quotes with fees broken out allows identification of the best overall packages.

For newer used cars, certified pre-owned (CPO) versions sold by franchised dealers tend to have lower fees than independent used lots.

The Bottom Line on Dealer Fees

Dealer fees largely remain a necessary evil when purchasing a vehicle from a dealership. While buyers may negotiation minor reductions in certain charges, the bulk of fees are non-negotiable.

The best recourse is focusing negotiations heavily on vehicle price, which then reduces the relative percentage of dealer fees. Shopping quotes between multiple dealers also allows selection of the best overall packages.

Approaching negotiations informed on typical fees, realistic on savings expectations, and prepared to walk away if necessary leads to the best outcomes for buyers. But most should resign themselves to paying several hundred dollars in dealer fees when purchasing from a dealership.

FAQs

What are the most common dealer fees?

The most common dealer fees include:

1. Documentation fees: These fees cover the cost of paperwork and can range from $85 to over $895, depending on the state and dealership.
2. Destination charges: These fees cover the transportation costs of delivering a new vehicle to the dealership and can vary depending on the location of the vehicle.
3. Dealer preparation fees: These fees cover the cost of preparing the vehicle for sale, such as cleaning, inspecting, and fueling.
4. Advertising fees: These fees cover the dealership's advertising expenses and are often included in the overall price of the vehicle.

Can you get dealer fees removed?

It is possible to get dealer fees reduced or removed, but it typically requires negotiation with the dealership. While some fees may be non-negotiable, others may be more flexible. It's important to review the fees carefully and ask the dealership about any fees that seem excessive or unnecessary.

Are dealer fees required by law?

There is no law requiring specific dealer fees. However, state laws may regulate the maximum amounts that dealerships can charge for certain fees. It's important to familiarize yourself with the laws in your state to understand your rights and protections as a consumer.

How much are average dealer fees?

On average, total dealer fees can range from 8% to 10% of the vehicle price. For example, on a $30,000 car, the average dealer fees would be around $2,400 to $3,000. It's important to note that dealer fees can vary depending on the dealership and location.

Should I avoid high dealer fee cars?

It is generally recommended to compare fees across different dealerships and consider the overall cost of the vehicle, including dealer fees. High dealer fees can significantly increase the cost of the car. By shopping around and comparing prices, you can find dealerships with more reasonable fees and potentially save money.

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