Buying a Car: Why Is Your Final Cost More than Sticker Price?
Buying a car can be an overwhelming experience, even for the seasoned expert. One reason that car purchases can be stressful is that it’s difficult to understand exactly what you’ll pay when the transaction is finalized. While the neon stickers on the cars claim to offer great deals, drivers almost always end up paying more than sticker price. While this might be frustrating for some car buyers, many of the taxes and fees that car dealerships add onto sticker price are legitimate and necessary. Unfortunately, dealers aren’t always upfront in the way they communicate those added costs. The following review of common fees should help to explain why buyers generally pay more than sticker price.
Vehicle ownership is regulated and monitored by state governments. Registration allows for local governments to be sure that car owners have an official title and are complying with inspection and emissions criteria. The cost of your registration fees is usually proportional to the cost of your vehicle. To help you avoid the hassle, dealerships typically handle the registration process for you. While many buyers are frustrated by this unexpected cost, it’s a necessary evil required of all drivers by their local governments.
If you pay attention every time you make a purchase, you’re probably accustomed to paying sales tax. Unfortunately for frugal customers, sales tax is a requirement whether buying a donut or a new car. Depending on where you buy, your city or county may also assess a tax on the purchase of your new vehicle. Because ticket price is generally so large, the added cost of sales tax can be substantial and shocking for some buyers. It is important to understand, however, that sales tax is a legal requirement and not something the dealership is adding on in order to make an extra buck.
Nearly every car dealership charges a dealership fee at closing, often called a documentation or “doc” fee. This fee is meant to help the dealer recoup the cost of preparing the sales contract and other paperwork associated with the sale of a vehicle. In some states, documentation and dealership fees are regulated and capped by state governments. Some dealerships will agree on lowering the sales price to make up for the added cost of the doc fee, potentially saving buyers hundreds of dollars.
Advertising fees are probably the most difficult fees to understand and evaluate. Their complexity stems from the fact that both the vehicle manufacturer and the local dealership sometimes assess them. Manufacturer advertising fees generally appear on the vehicle invoice and are more difficult to negotiate. Dealership advertising fees, meant to recover some of the dealership’s media and promotional costs, are more discretionary and, therefore, can sometimes be reduced or eliminated.
New car shoppers are often confused and frustrated when they find that the price they are being asked to pay is higher than the sticker price that they first encountered. While additional costs may be perplexing, buyers should not automatically assume that the dealership is taking advantage of them. Many of these fees will seem more reasonable once a buyer takes the time to understand them and if dealerships make a better effort to communicate their purpose effectively.