What fees do you pay when buying a car?
The final price you pay when buying a car isn't only the cost of the vehicle itself. You'll also pay documentation fees and sales tax. However, you could find additional fees tacked on to the final cost that aren't necessary. Depending on your situation, you can negotiate fees that can reduce the overall cost of the purchase.
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What are common non-negotiable fees when buying a new or used car?
You'll have difficulty avoiding some taxes and fees on new cars. These include the vehicle registration fee, sales tax, and documentation fee.
Vehicle registration fee
The vehicle registration fee includes the cost of registering the vehicle, issuing a title, and the cost of the license plates you attach to your vehicle. The registration fee is affected by the car's current value, fuel efficiency, age, and sometimes even its weight. Different states calculate the fee based on various factors, while others charge a flat rate. Registration can range from less than $50 to more than $200, depending on where you live.
Sales tax
The sales tax, which will vary by state, is the most significant additional cost when buying a new or used car. Because sales tax for a car is just like sales tax for any other product, and considering that you're paying significantly more for a vehicle than, say, your groceries, the final tax amount can be staggering – for example, an 8% sales tax on a $20,000 vehicle is $1,600. Some cities and counties add another tax on top of the state tax, so you may pay several thousand dollars more.
Documentation fee
The documentation fee covers preparing and filing the sales contract and other relevant paperwork. Some states place limits on how much these fees can cost. Other states have no limits on how high these fees can go. The difference between documentation fees in states that do and do not limit them can be significant.
What fees must be paid upfront when you buy a car?
Depending on the dealership, you may be able to drive off in a new vehicle without paying any fees upfront. However, the dealership may factor any fees that they didn't include with your initial payment into your monthly car payment.
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Can you negotiate some of the additional costs when buying a car?
Yes, you can challenge or negotiate down some fees when buying a new car. Some dealerships add on fees to increase their profit. The state doesn't legally require these fees, so dealers might drop them if you threaten to walk away from the purchase. Negotiable fees when buying a new car might include:
Advertising fees: These are the costs the dealership will sometimes charge buyers to offset the cost of their advertising. Depending on the dealership, they can cost up to a thousand dollars or more.
Add-ons: The dealer may pass the costs on to you for add-ons to a vehicle, like window tinting or mudflaps.
Destination fee: This is typically a charge for preparing the car for purchase. It's a standard fee but might be negotiable as part of the sale.
Paint protection or pinstriping: A professional pinstriping job may cost between $50-$100. While it could affect the look of the vehicle, it isn't strictly necessary, and it's not something you should pay for.
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Being an informed buyer may get you a better deal
There are several things you can do during the sales process to help negotiate the cost of your car. Don't be afraid to look at different dealerships. If you live in a state where documentation fees have no limit, you may be able to get better prices at a different dealer. Look out for what's known as the "supplemental" sticker. It lists markups and add-ons besides the factory MSRP sticker. If you see a dealership with these stickers, walk away.
Take the time to research the average cost of the vehicle that interests you. Know its Kelley Blue Book value and the cost of add-ons, insurance, and other expenses. Knowledgeable buyers often have an edge in negotiations. Ask the salesperson for a complete, detailed breakdown of all expenses before you agree to a deal. This gives you a better understanding of what they are expecting you to pay and what it'll cost you. If you're buying a used car, learn more about negotiating used car prices.
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