9 Fees to Never Pay a Car Dealership

If you’re unsure about a fee listed on the vehicle sales contract, ask about it before you sign anything. Below are standard dealer fees you can avoid if you know what to look for. 

1. Dealer preparation fee

Destination charges pay for the costs of delivering a car to a dealership, but dealer preparation fees, also known as reconditioning fees, cover the cost of preparing that car for sale. Most preparation procedures include washing the vehicle, detailing it to meet dealership standards, and installing dealership plates or badging. Dealer preparation fees are separate from inspection fees. 

Despite the obvious need to prepare a car for sale to attract as many customers as possible, dealer prep fees are simply the cost of doing business. However, if you see this charge on your sales contract, ensure the car comes with a complimentary full tank of gas. You can also inspect the car to identify any areas where any preparation procedures may be lacking, such as scratches, stains, or debris that haven’t been removed. 

2. VIN etching

Etching the Vehicle Identification Number (VIN) into a car’s various components can help deter thieves from stealing and illegally selling them on the black market. However, the dealership often marks up this anti-theft product and procedure you can easily do yourself. Most DIY applications cost less than $50, while dealerships charge hundreds of dollars. 

3. Protection products

Depending on which dealership you purchase your car from, you may be met with one or more sales pitches concerning protection products. Examples include key, tire and wheel, windshield, dent, paint, and fabric protection. These products often come with incentives and represent one of the tricks car salesmen use to pad their profits. Most of these products are ineffective, and claiming any warranty requires excessive effort.  

4. Market adjustment pricing

The last few years have not been the best time to buy a car, especially if you’re looking for a specific model. Pandemic pricing has cooled recently, but new and used car sale prices remain higher than pre-pandemic levels. Dealerships elevate pricing via “market adjustments,” which really just represent an increased demand for four-wheeled commodities. 

Avoiding market adjustment pricing, especially on a new vehicle, can feel like a losing battle. Negotiating your way out of paying this markup can require some effort, especially if you’re attempting to purchase a car in high demand. However, comparison shopping can help you at least verify the prevalence of this dealership fee in your area. 

5. Advertising fees 

Seeing a dealership advertising fee listed on your sales contract can have you wondering how a company can advertise but pass on those fees to the customer they’re attempting to entice. Dealers often justify this fee as necessary to reach you to let you know about the car you’re working a deal on. Had they not advertised on billboards, the radio, via direct mail, or through email, you may not be sitting in their finance and insurance office discussing fees. 

Like the destination and dealership preparation fees, advertising is part and parcel of any dealership's business costs. Dealerships may advertise specific models or their presence in a locale, but that budget shouldn’t be your responsibility. After all, you may have found the listing for the car you’re negotiating over through a third-party website that charges advertising fees of its own. 

6. Extended warranties 

Sometimes known as vehicle service contracts, extended warranties lock in a contract between you and the dealership for a particular service. For example, extended warranties cover repairing or replacing specified mechanical and electrical components. Many buyers purchase extended warranties to avoid costly repairs down the road, but savvy buyers understand that implementing disciplined savings plans could cost you less and cover expensive repairs without having to abide by terms and conditions. 

7. Dealer add-ons

Window tint or clear mask are two prime examples of dealer add-ons that the consumer pays for. A dealership may contract with a third-party vendor to install these add-ons but then pad the pricing to profit from installation when the car is sold. While these additions may increase the vehicle's value, installing them yourself can save you hundreds. Challenging these fees can also reduce your out-the-door costs. 

8. GAP insurance 

When financing a car loan, guaranteed asset protection (GAP) insurance can help you avoid owing thousands of dollars if your car is declared a total loss while you’re still paying down the loan. Most insurance companies offer the actual cash value (ACV) of a vehicle if declared a total loss, leaving you in the lurch for the difference between the ACV and the loan amount. Should a total loss event occur, GAP insurance pays for the difference so you can make a clean break. 

9. Accessories

Branded vehicle accessories can make you feel sophisticated, but you can easily find most accessories at a more affordable price online. Depending on your chosen accessories, the dealership may also charge you to install them. However, you can use the accessories you want to your advantage if you need another negotiating tool. If the dealership wants to charge you for something, see if they’ll throw in your desired accessory to sweeten the deal. 

While there are certain fees you can and can’t avoid, some live in a gray area where they may or may not be eligible for negotiation. Below are some of those extra fees you may be able to contest: 

• Documentation fees: Dealerships charge an administrative fee for drawing up the paperwork necessary to purchase your vehicle. You can sometimes haggle this price down based on what’s reasonable. Some dealerships roll registration into their documentation fees, so it pays to tease out the line items that comprise the overall fee. 
• Destination fees: Transporting a particular vehicle to the dealership you’re purchasing it from requires time and money, represented by the destination fees. However, dealerships often mark up destination fees, even if they received the car via a trade-in and paid nothing to add it to the lot. Inquiring about where the car came from can help you distinguish the validity of this particular fee.

The opportunity to negotiate dealership fees doesn’t guarantee a price reduction. Savvy car buyers know it’s a good idea to have a few backup ideas in mind when negotiating stalls. For example, you can request an accessory be added to the deal if the dealership is unwilling to reduce a particular fee. However, some negotiations simply end with neither party budging much, often resulting in the buyer walking away from the deal entirely.

Some parts of the car-buying process are non-negotiable, from knowing what credit score is needed to buy a car to recognizing what dealer fees you can’t avoid. Here are a few fees you typically can’t avoid: 

• Sales tax: Purchasing a car, even if you’re financing the deal, requires paying sales tax according to local tax laws. Depending on where you live, you may have to pay city, county, and state taxes. You can find the exact amounts listed by searching for your local tax rates, which you should still verify on your purchase paperwork. 
• Registration: Vehicles must be registered with the local Department of Motor Vehicles (DMV) to drive on public roads legally, but dealerships are authorized to register your vehicle with the state on your behalf. However, they often charge you for the convenience. If your registration fees exceed 3% of the car’s purchase price, contest that padding.

It’s important to note that some electric vehicles (EVs) incur additional charges when registering with the local authorities. Most fees are between $50 and $225 and are often charged to offset the tax revenue lost from driving a non-gas-powered vehicle.