Looking for a car? Avoid These Dealer Commissions
Purchasing a new car is stressful enough that it’s helpful to visit a dealership knowing what expenses on your invoice are unavoidable, negotiable, and omitable.
And remember: you have the option to go and shop elsewhere. Here is what CR member Ron Martinson of Falls Church, Virginia says: “I said [the salesperson] that he has one chance to make me his last/best offer, and that there will be no “surcharges” other than government fees/taxes. He lost the deal.”
These government fees may include government sales tax (usually based on the difference between the price of a new car and, if you have one, the value of your trade-in item) and the cost of establishing ownership and registering in your name. Another unavoidable charge is the destination fee, or what the automaker charges for shipping the car from the factory to the dealership; it is included in the official window sticker.
But you can often avoid other fees or negotiate lower fees. And check the laws in your state: some limit the fees dealers can charge.
Documentation or shipping costsWhile it’s reasonable for you to cover the cost of your title and registration (usually 1 to 3 percent of the value of the car), dealers often charge additional fees—sometimes hundreds more—for these and other paperwork.Correction: You may not be able to completely avoid this fee, but you can try to get a discount or ask for something in return, such as dealer-installed accessories such as winter floor mats.Advertising feeDealers sometimes add an extra few hundred dollars to help offset the cost of national and regional advertising campaigns.Correction: If the dealer says they will sell the car for the invoice price but you have to pay an advertising fee, just say no. The cost of car advertising is included in the price of the sticker.
Delivery and preparation costDealers sometimes put a second sticker on the car window next to the official one, listing expenses with names such as “pre-delivery inspection”, “dealer preparation”, “vehicle preparation”, and “vehicle purchase”.Correction: Compete with everyone. They are part of the mandatory destination fee, which by the way must also include a full tank of gas.
Market Adjustment FeeThis is hard to avoid if you are shopping for hot sellers because dealers may have little incentive to negotiate.Correction: However, it’s not a mandatory fee, so it’s worth asking for a discount, especially since value added isn’t just an upfront cost. The initial surcharge also usually means additional losses as the car depreciates.
Loan payment feeMany automakers offer loans directly to car buyers, and a third of our survey participants who received one of these loans said they were surprised by the fee associated with it. For example, Diane Weiser of Port Lavaca, Texas, says she was shocked to find that every time she called to make a payment, she was charged a $10 customer service fee. “And this is also for timely payments!” she says.Correction: Make sure you understand the payment terms before contacting the automaker’s finance department. Also check with your bank, which may offer a better deal and lower or no fees.
Unnecessary extras
While not technically a fee, dealers often try to sell unneeded services or features, including:
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VIN etching: Your local mechanic will charge you a smaller fee for this anti-theft measure, which includes engraving your vehicle identification number on your vehicle’s glass. Or buy a DIY kit for just $20.
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Disability and life insurance: Some dealers offer these and similar policies with your car loan to help you pay for your car if you get injured or die early. But you can get cheaper coverage through your main insurance company, car or life.
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Rust protection, paint coating or fabric protection: Modern cars are built to withstand corrosive weather and road conditions, so they don’t need the extra treatments that can add hundreds to your car’s value. Paint sealers are essentially just wax that wears off after a few months. And internal protection is just an expensive fabric protection spray.
What fee?!
Are you tired of the endless stream of additional payments that appear on your bills? On the TV show Consumer 101, a Consumer Reports expert explains to host Jack Rico how to avoid those pesky fees.
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