Car Buyer Fees 101: Insurance, Taxes and Tabs

(Here's what you need to know)

A man questioning his car dealer on some paperwork.

The car sales tax and other mysterious dealership fees have a way of sneaking up on you. You find the car you want, and then you haggle for hours or maybe days until you feel satisfied with the price. But now there are all these other numbers flying around the sales office, and, suddenly, your great deal seems a little less great. 

So, let's talk about that. What are the car taxes, title fees, auto insurance and other tabs you have to pay to get out of the dealership with your new car? And how do you know when it's getting out of hand? 

Car Sales Tax and Car Title Fees

The car taxes you pay on the vehicle you buy depend entirely on the laws of your state. You can plan for this before you walk into the dealership by checking the rates for your state's car taxes online. Beyond the cars sales tax charged by the state, Edmunds warns that you will encounter two other mandatory fees: vehicle registration fees and documentation fees. You pay the registration fee to your state, just like the sales tax. It covers the car title fees and the license plates on your new auto.

Documentation fees, or "doc fees," are more of a gray area. This is what the dealership charges to take care of registration, car titling and other legal paperwork involved in a sale. Some states put a cap on these fees, and others don't regulate them at all. So your dealer may have free reign to charge exorbitant prices for documentation. Edmunds advises that anything over $100 is probably over the top.

Negotiable Dealership Fees

Some of the fees you might find on your contract have nothing to do with state law and everything to do with the dealer making a few extra bucks on the back end of a deal. These are the fees to haggle over to keep your amazing discount from turning into a mediocre purchase. The language in your contract might vary, so don't be afraid to ask for an explanation of every little line item on the pages. This is your money on the line, after all.

David Kiley writes for AOL Autos that there are several common dealership fees you may or may not have to pay if you play your cards right:

  • Delivery: This is not delivery to you, the buyer, but delivery to the dealer from the car factory. It might seem silly to pay this when the dealer would have had the car delivered regardless of whether you showed up to buy it, but it has become common. You might be able to talk it off the contract. But certainly draw the line at paying it twice. Kiley explains, "Look to see if there is a 'destination' charge, as well as a delivery charge. If there is, tell the dealer you aren't paying the 'delivery charge,' because it's nonsense. The 'Destination Charge' is an accepted fee."
  • Advertising and dealer prep: These are not your problem. You are under no obligation to cover the dealership's local TV commercials or the cost of cleaning and putting oil in the used cars on the lot. If the dealer is unwilling to remove these fees from the contract, you might be better off walking out and dealing with someone more concerned with customer service.
  • Warranties: Whether the dealer warranty is worth the money is a toss-up. In most cases, you can get a better deal through your credit union or bank, but that doesn't mean a dealer warranty is trash. If you are purchasing a new car, it's a good idea to find out what the manufacturer offers before buying further coverage from the dealer. Feel free to say no thanks if you think you can do better.

Insurance Is Not a Dealership Specialty

The Finance and Insurance agent at the dealership is often the highest-paid employee there, because that agent makes the dealership a lot of money by overcharging you for loans and insurance. You are almost always better off purchasing your car insurance far from the sales floor. 

The best option is usually an independent agent who works for you rather than an insurance company. Independent insurance agents can get you coverage from a wide variety of insurance providers. That means they can shop around to find you the best deal possible on coverage for your new or used car.

Know the Rules and Stand Your Ground

Kiley notes that, "A confident and knowledgeable car buyer is the toughest customer for a dealer to negotiate with, so prepare." Local governments require car title fees, car sales tax, registration and sometimes city or county sales tax no matter where you purchase your new or used vehicle. Everything else is between you and the dealer. Once you know what is and what is not mandatory regarding car taxes and fees, you can safely hammer out the best car deal you've ever made.

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