Consumer Reports: Car buyers beware of the "destination fee"

Purchasing a new car can be stressful, especially when inventory is low while demand is high. But now there's an increasing fee to worry about on your bill of sale.

Video Transcript

- At 4. Purchasing a new car is stressful enough, we know that, especially these days when inventory is so low and demand is so high.

- But now there's an increasing fee to worry about on your bill of sale. Here's our Nidia Hahn to explain. Nidia?

NIDIA HAHN: Yeah, guys, you know, we just warned you that prices on both new and used cars are skyrocketing, due to pandemic-related issues. And now the Consumer Reports investigation reveals another reason why you should prepare to pay more for a vehicle. Do you pay an extra fee for those eggs you bought to get from the farmer to the grocery store? Of course not. But you likely paid a similar fee the last time you bought a car. It's called a destination fee.

MIKE MONTICELLO: Also called delivery processing and handling, or inland freight and handling fees.

NIDIA HAHN: These non-negotiable fees appear as a line item on car window stickers.

MIKE MONTICELLO: We know destination fees have something to do with getting a car from a factory or a US port to a dealership, but there's not a lot of transparency beyond that.

NIDIA HAHN: They're rarely disclosed in ads or on automaker websites, so they often take unsuspecting buyers by surprise. And Consumer Reports investigation found automakers have increased destination fees from an average of $840 in 2011 to $1,240 in 2020. That's almost a 50% increase, and more than 2 and 1/2 times the rate of inflation.

MIKE MONTICELLO: The lack of transparency about how destination fees are derived and the rate that they've been increasing deserves a second look. Many consumer advocates suspect these fees are just a way for automakers to boost the bottom line without officially raising prices.

NIDIA HAHN: So what can you do? CR says to negotiate the bottom line for the vehicle, not the destination fees, since the dealer won't budge on those. Insist on discussing your out-the-door all-in price, and don't be shy about asking for a reduction. If you don't get it, consider walking away. Car dealers expect you to haggle, and they just might match your price to make the sale. NCR says the best way to haggle for a car is over email. Not only is it COVID compliant, it's also a great way to get the deal in writing before you even step foot in the dealership. Now you know, guys. I like the email. You don't have to talk to anybody.

- Thank you, Nidia.