Edmunds.com Explains Confusing Car-Buying Fees


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Edmunds.com Explains Confusing Car-Buying Fees

SANTA MONICA, Calif. — December 5, 2006 — Car-buyers are often surprised to learn that after they finalize their vehicle purchase price, dealerships add in taxes and tack on fees that can boost the price by as much as $3,000. Are these costs negotiable? Edmunds.com (http://www.edmunds.com), the premiere resource for automotive consumer information, advises consumers and sets realistic expectations in its new article, What Fees Should You Pay? at http://www.edmunds.com/advice/buying/articles/117494/article.html.

"Unexpected costs at dealerships can really upset car-buyers, and can even be a deal breaker if the fees put the car above the buyer's financial limit," said Philip Reed, Senior Consumer Advice Editor at Edmunds.com and co-author of Strategies for Smart Car Buyers. "Early in the shopping process, consumers should ask dealerships about the fees they charge and take that into account as they negotiate."

Some add-on costs are levied by the state and some are generated by the dealership itself. Added costs that consumers may face at dealerships include:

  • Documentation Fee: Charged by the dealership to process the sales documents. Also known as "doc fees," these are regulated by some states, as the chart shows. If the state does not set a maximum, the fee could be negotiable.
  • Vehicle Registration Fee: Charged by the state to register the car, assign title and pay for license plates.
  • Sales Tax: Charged by the state, with additional amounts sometimes levied by cities and counties. In some states, buyers only pay tax on the difference between the new purchase and the trade-in. Also, states treat incentives differently, as shown in the chart.
  • Destination Charge: Charged to the dealer by the automaker to cover transportation from the factory. The fee is typically passed on to the buyer and is not negotiable.
  • Dealer Fees ("Shipping," "Dealer Prep," etc.): Charged by the dealer to recoup business costs. These fees may be negotiable or avoidable.
  • Advertising Fee: Charged by either the manufacturer or the dealer to recoup marketing costs. If the fee is listed on the car's invoice — something the buyer should always request to see — Edmunds.com recommends the consumer pays it in full. If the fee is written into the contract, the fee may be negotiable or avoidable.

"In recent years, fees have become more important to dealerships because their profitability has suffered from the transparency of pricing that didn't exist before the Internet. So, consumers who negotiate forcefully may help to generate a very stressful transaction," remarked Reed. "Customer satisfaction typically results from a fair deal and a pleasant interaction, and that requires effort from both sides of the desk."

Taxes and fees differ greatly in different regions. The following chart gives some examples of how widely costs vary across the country:

State
Maximum Possible Sales Tax (%)
Average Registry Fees Charged
Maximum Documentation Fees
Trade-In Sales Tax
Are Incentives Taxed?
Arizona
10.70
$500
No limit
Yes
Yes
California
8.75
$232
$45
No
Yes
Florida
7.50
$182
No limit
Yes
Yes
Georgia
8.00
$38
No limit
Yes
Yes
Illinois
9.25
$143
$55.39
Yes
Yes
Michigan
6.00
$216
$170
No
No
New York
9.00
$78
$45
Yes
Yes
Texas
8.25
$85
$50
Yes
No

A chart containing information on all states can be found in the article What Fees Should You Pay? at http://www.edmunds.com/advice/buying/articles/117494/article.html.

"Consumers should do as much research as possible before buying a car so they are never taken off guard. Know the Edmunds.com True Market Value® price of the new car and the trade-in, be aware of incentives and rebates available, and be prepared for the fees and taxes that will be charged," said Reed. "Also keep in mind that the price of a vehicle is not the only expense. Consumers should also review the True Cost to OwnSM tool to estimate vehicle ownership costs such as maintenance and insurance."

About Edmunds Inc. (http://www.edmunds.com/about/)
Edmunds Inc. publishes three Web sites that empower, engage and educate automotive consumers and enthusiasts. Edmunds.com, the premier online resource for automotive consumer information, launched in 1995 as the first automotive information Web site. Its most popular feature, the Edmunds.com True Market Value®, is relied upon by millions of people seeking current transaction prices for new and used vehicles. Edmunds.com was named "Best Car Research Site" by Forbes ASAP, has been selected by consumers as the "Most Useful Web Site" according to every J.D. Power and Associates New Autoshopper.com Study(SM), was ranked first in the Survey of Car-Shopping Web Sites by The Wall Street Journal and was rated "#1" in Keynote's study of third-party automotive Web sites. Inside Line launched in January 2005 and is the most-read automotive enthusiast Web site. CarSpace launched in February 2006 and is an automotive lifestyle social networking Web site for anyone with an interest in automobiles. The company is headquartered in Santa Monica, California, and maintains a satellite office in suburban Detroit.

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