As we buyers have gotten smarter and more prepared thanks to online researching, dealers have gotten more creative in hiding add-on fees and charges you might not need to pay.
It’s no wonder that the car-buying experience has rated in the top ten of the things we least like to do, for the last 20 or 30 years or more.
Here are warnings and tips on what to look out for, so you don’t pay for the same twice with different names, things you don’t need that put more money in the dealer’s bank account and less in yours, and some questions to ask before you sign on the dotted line.
Destination or delivery, but not both
Somebody has to pay for getting the car from the factory floor to the showroom floor, and that’s a normal and standard charge passed through to you by the dealership. Sometimes it called a destination charge, sometimes it’s called a delivery charge.
- Warning: Check the sales contract carefully to be sure you are not paying twice for the same thing. Destination change or delivery charge, but not both.
Take advantage of rebates
Automakers often offer dealers special discounts or rebates for a particular model. It could be because that model is losing popularity, or because the manufacturer wants to undercut a similar model by another brand.
- Tip: It’s easy to find out about rebates advertised on TV or in your daily newspaper. But there are plenty more rebates only the dealer knows about, so ask.
- Warning – It’s a hidden charge when the dealer doesn’t tell you about an available rebate.
Some states charge sales tax on the full purchase price, before the rebate, and other states charge tax on the reduced price. Depending on the amount of the rebate and the sales tax rate, that could be $150 or more.
- Tip – Since the dealer might not tell you what the rules are, check with your DMV or state insurance association before you buy or lease.
- Warning – It’s a hidden price increase when the dealer pockets that difference.
How much should it cost for the dealer to put oil and windshield wiper fluid into the vehicle? Nothing. That should be part of the dealer’s cost of doing business to give you, the customer, a product that’s ready to use.
- Tip – Dispute any tacked-on “service fee” such as a giant refueling charge similar to what car rental companies add when you return a vehicle running on empty.
Somebody has to do the back office work to check your credit rating, prepare the sales contract, including all that legalese about warranties and covered repairs, so this is a great place for the dealer to inflate the purchase price with hidden fees, which can be as much as $500.
- Tip – There re just a few states which legally limit what a dealer can charge for paperwork – usually that’s no more than $250, or a percentage of the purchase price.
- Tip – Make the dealer break it down line-by-line so you can see what costs are legit, and what is padding.
Paying for their newspaper ads and TV commercials
- Warning – It’s becoming more common for dealers to tack on $100 or more to cover the cost of their advertising, buried in the contract legalese, perhaps within the documentation fee, as “marketing”
- Tip – Just say no – it’s their cost of doing business, not yours. What’s next? Paying for the salesman’s new shoes to walk you around the showroom?
Vehicle Registration Fee
- Tip – Most of us consider a trip to the DMV as much fun as root canal, so this is not as much a hidden fee as it is a convenience fee. It’s not a mandatory fee.
Rust, Paint and Fabric Protection
- Warning – Unless you live in a flood-prone zone or use car or your truck as an amphibious vehicle, the manufacturer-installed rust protection should be enough, making this a hidden price increase.
- Tip – It’s a lot cheaper to buy for a bottle of touch-up paint for those inevitable minor dings and scratches that go with normal vehicle use, and a can of ScotchGuard fabric or leather treatment to clean up after the kids.
- Warning – The problem with extended warranties – besides the $1,000 or bucks they cost – is that they are from a third-party insurer, not from the dealer or manufacturer, and there’s no guarantee that Fly By Night Extended Warranty Service still will be in business in three years when the manufacturer’s warranty runs out.
- Tip – Before you take the bait, check out the warranty company with the Better Business Bureau, the American Insurance Association (www.aiadc.org) or the insurance association in your state.
- Tip – Or, buy a car from a manufacturer that offers a longer warranty period, such as Hyundai.
Paying for their newspaper ads and TV commercials
- Warning – It’s becoming more common for dealers to tack on $100 or more to cover the cost of their advertising, buried in the contract legalese as “marketing” . Just say no – it’s their cost of doing business, not yours. What’s next? Paying for the salesman’s new shoes to walk you around the showroom?
Overnight Price Increase
Another new hidden price increase trick is to add a couple of hundred bucks overnight, between the time you agree on a purchase price after being worn out mentally and physically by hours of haggling, so that when you return the next day to sign the contract and drive away, the price is higher.
- Tip – Protect yourself by requesting a “take home” copy of the unsigned contract, although it’s unlikely a dealer will give you that, just in case you want to take it down the road to another dealer to get a better deal.
- Tip – Snap a cellphone photo of the bottom line dollar number, or write it down in the little notepad you should have had with you all along to jot down bits and pieces of the negotiation process, so you have proof of an overnight price increase.
Fees to refuse
Fees for anti-theft systems, VIN etching, and pinstriping are things to consider, but if you’re interested in them, you can likely find a cheaper price outside the dealership, according to ConsumerReports.org.
Insurances such as credit life and disability are worthy investments, just not from a dealership. ConsumerReports.org explains that term life insurance can be a less expensive substitute for credit line insurance, and disability insurance might already be rolled into your employer benefits. In either case, a little outside research will save you some money.
This article is adapted from one I wrote for US News and World Report, and published on their website.