Watch your step to prevent paying more than you should for a new car
By Jon Linkov
Purchasing a new car is stressful enough, so it helps to go into a showroom knowing which of the charges that show up on your bill are unavoidable, which can be negotiated, and which you can skip altogether.
And remember: You have the power to walk out and shop somewhere else. That’s what CR member Ron Martinson of Falls Church, Va., says he did: “I told [the salesperson] that he got one chance to give me his final/best offer, and that there would be no ‘add-ons’ except for government charges/taxes. He lost the deal.”
Those government charges can include state sales tax (usually calculated based on the difference between the price of the new car and, if you have one, the value of your trade-in) as well as the cost of establishing the title and registration in your name. Another unavoidable fee is the destination charge, or what the automaker charges for delivering the vehicle from the factory to the dealership; it’s included in the official window sticker.
But you can often avoid other fees or negotiate them down. And check the laws in your state: Some cap the fees that dealers can charge.
Documentation or Conveyance Charges
Though it’s reasonable for you to have to cover the cost of your title and registration (typically 1 percent to 3 percent of the vehicle’s cost), dealers often charge extra—sometimes hundreds more—for processing these and other documents.
The fix: You might not be able to avoid this fee entirely, but you can try for a discount or ask for something in return, such as dealer-installed accessories like winter floor mats.
Dealers sometimes add an extra few hundred dollars to recoup the cost of national and regional advertising campaigns.
The fix: If the dealer says he will sell a car at the invoice price but you have to pay an advertising fee, just say no. The cost of advertising the car is baked into the sticker price.
Delivery and Preparation Fees
Dealers sometimes paste a second sticker on a car’s window next to the official one, listing charges with names like “pre-delivery inspection,” “dealer prep,” “vehicle prep,” and “vehicle procurement.”
The fix: Contest them all. They’re part of the mandatory destination charge—which, by the way, should also include a full tank of gas.
Market Adjustment Fee
This is a tough one to avoid if you are shopping for a hot seller because dealers may have little incentive to negotiate.
The fix: Still, it’s not a mandatory charge—so it’s worth asking for a discount, especially because the added cost is not just an up-front expense. Paying extra initially also typically means losing more as the car depreciates.
Loan Payment Fees
Many automakers offer loans directly to car buyers—and a third of the people in our survey who got one of those loans said they were surprised by a fee connected to 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 that was for on-time payments, too!” she says.
The fix: Make sure you understand the payment terms before you go through an automaker’s financing arm. Check with your own bank, too, which may offer a better deal and lower or no fees.
Though not technically fees, dealers often try to upsell unnecessary services or features, including:
VIN etching: A local mechanic will charge you less for this anti-theft measure, which involves etching the vehicle identification number on the car’s glass. Or buy a do-it-yourself kit for as little as $20.
Extended warranty: A warranty that covers repairs after the manufacturer’s warranty expires can provide peace of mind. But it can add thousands to the cost of the car. CR recommends buying a reliable vehicle and setting aside an emergency fund instead.
Disability and life insurance: Some dealers offer these and similar policies with your auto loan to help you pay for the vehicle if you are injured or die early. But you can get cheaper coverage through your primary home, car, or life insurer.
Rustproofing, paint sealing, or fabric protection: Today’s cars are built to withstand corrosive weather and road conditions, so they don’t need additional treatments, which can add hundreds to the cost of your car. Paint sealants are basically just wax that will wear off after a few months. And the interior protection is just expensive spray-on fabric protectant.
What the Fee?!
Are you tired of the endless stream of add-on charges that appear on your bills? On the TV show “Consumer 101,” Consumer Reports’ expert explains to host Jack Rico how to avoid these pesky fees.
Editor’s Note: This article has been updated since it originally appeared in the July 2019 issue of Consumer Reports magazine.
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