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The Typical Fees When Buying a Car

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Ford Fiesta

You have found the car of your dreams, carefully negotiated the final price and are ready to sign the purchase agreement. Pay careful attention here as there are any number of fees, taxes and charges that can drive up your overall cost. Certain expenses, including dealer extras, may be avoided. Here’s what you need to know about the typical fees when buying a car.

1. Destination charge. You usually cannot avoid the destination charge, what represents the cost of transferring a vehicle to the dealership. These costs vary, but typically range from $895 to $1,150, depending on the vehicle. When reviewing your contract, look for secondary charges that may indicate an additional delivery fee. Have that cost struck from your purchase agreement.

2. Title and registration. Fees related to acquiring the title and registering your vehicle with the state cannot be avoided. What you can avoid is doing the paperwork yourself. Let the dealer handle this matter; take note of the documentation fee — the cost of having the dealer handle this step for you. A $100 to $300 charge is within reason.

Hyundai Sonata

3. Sales tax. This will be your greatest “add on” expense when buying any car. Some states calculate the tax based on the final cost of your car. Other states calculate that cost based on your new car’s final cost minus your trade in. In some cases, you may end up paying your state a few thousand dollars in sales tax.

4. Dealer markup. You may have negotiated the best price you could for your new vehicle and feel that you have come out a winner. Then, you look closer at the purchase agreement and see a “dealer markup” charge. That’s an expense a dealer may try to pass on to you, especially for a high-demand vehicle. Contest this fee or at least negotiate for a lowered cost.

5. Advertising charge. Who knew that you might have to pay for an advertising surcharge? Dealer associations may charge the dealership for a local advertising initiative, one that the dealer may pass on to you. You may be able to get this cost removed from your contract, but not always.

Chrysler 300 Limited

6. Dealer preparation. Your dealer may pass on the cost of preparing the car for sale to you. So-called “dealer prep” means removing the protectant and the coverings required to safely transport a new vehicle from the factory to the dealer. This cost should be removed from your contract as manufacturers routinely reimburse dealers for the cost.

7. Disability insurance. Agree only to this type of insurance if you don’t have it through your employer. What it offers is coverage for your car payments while you are unable to work. Chances are you can find this insurance elsewhere for a more reasonable cost.

8. Credit life insurance. If you die, then your survivors can pay off your loan with credit life insurance. It is term life insurance or what expires once you have made your final car payment. Ensure that the coverage is sufficient and inexpensive.

Nissan GT-R

9. Dealer upgrades. There are a number of services and add ons that your dealer will be happy to tack on. For instance, if you request heated seats for a vehicle without them, you will pay that cost. Don’t agree to undercoating, VIN etching, paint sealant or fabric protection. Undercoating is already done at the factory level. The other services you can do yourself and for little cost.

10. Extended warranty. Should or should you not buy an extended warranty? Consider getting one if you plan to keep your car for many years or well beyond the time limit for the bumper to bumper and powertrain warranties. What you should know is that the best warranties are backed by the manufacturer directly or through a third-party source approved by the manufacturer. You also do not need to rush your decision here — you can sign up for a warranty later. Review your contract options and choose the warranty plan that is best for you.

Chevrolet Colorado

Fees and Considerations

If you lease a new vehicle, obtain GAP insurance. GAP or guaranteed auto protection insurance will protect you if your new vehicle is stolen or totaled. It fills in the gap between the vehicle’s residual value and the payments you owe on the vehicle. This is a worthwhile expense that can save you thousands of dollars.

See Also — Smart Car Leasing Options For Savvy Consumers

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MTV Says: Millennials Love Their Cars!

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Immediately following the Washington Auto Show — where some policy makers insist that young people are getting their licenses later and driving less than their counterparts of even 50 years ago — a study conducted on behalf of MTV strongly suggests otherwise.

Indeed, the “Millennials Have Drive” research study — released last week at the National Automobile Dealers Association (NADA) Convention and Expo 2015 in San Francisco— shows that young people are eager to drive. Moreover, they are placing driving ahead of such mainstays as social media and texting.

Car Ownership Study

The study, conducted last spring, was composed of 3,610 Millennials aged 18 through 34. Another 400 Generation Xers, roughly ages 35 to 50, and 403 baby boomers, ages 51 to 68, were also included. It was through focus groups, one-on-one interviews and subjective field studies, that much of the data used in the study were accumulated.

“Millennials are perhaps the most sophisticated consumers the world has ever seen – highly educated, demanding, and incredibly adept at using technology to make thoughtful purchases,” said Jeff Lucas, Head of Sales, Music and Entertainment, Viacom Media Networks. “We want to understand how Millennials’ attitudes toward car ownership are changing as they grow older, the economy improves and the auto sales landscape evolves.” Viacom owns MTV.

The MTV findings demonstrate that approximately eight in every 10 Millennials use a car more often than any other transportation mode to move them to where they are going. The researchers noted that these findings fly in the face of studies over the past few years that indicated a drop in interest in driving among younger people. They concluded that young people are “aging up into car ownership” and are in a better position to afford a new car as the economy improves.

Millennials Take to the Road

Notably, the study found that today’s young people claim to drive more miles per month than for any other generation. Those numbers show a 72 percent increase in the average number of miles driven in contrast to baby boomer drivers (934 miles vs. 544 miles) while also maintaining an 18 percent edge over Generation X drivers (934 miles vs. 790 miles).

The researchers described Millennial interest in driving as “passionate” as 70 percent of the youngest respondents articulated that they “like driving a lot” compared to 58 percent of baby boomers and 66 percent of Generation Xers. Furthermore, young people are demonstrating an even greater longing to purchase and own cars.

Some 82 percent of Millennials have shown excitement in finding, buying or leasing a new vehicle. Approximately 75 percent of young people indicated that “they couldn’t live without their current car.” They are also aspirants with 85 percent looking forward to “one day owning the car they’ve always wanted,” compared to 59 percent of baby boomers and 72 percent of Generation Xers.

A Better Buying Experience

Millennials are also embracing new cars and technologies at a greater rate than other generations. Some 73 percent of young people say they “love learning about new car models and functions” compared with 69 percent of baby boomers and 54 percent of Generation Xers.

In addition, the survey noted that there are some ways that dealers might enhance the buying experience for all consumers, especially Millennials. For instance, approximately 80 percent of respondents believe that the buying and leasing process should “take less time.” Also, most expressed dismay with current ratings and comparisons, finding them unclear. And 87 percent stated that the “buying process should be more transparent.”

And in a nod to aftermarket retailers, 87 percent of Millennials indicated that they like to customize their cars to make them unique. However, they would like to do so in more affordable ways.

Advertisers should also take note of what Millennials are thinking as 57 percent claimed that car advertisements influence their buying decisions. Yet, nearly half of young people said that such ads “do not speak to who they are.”

Subsequent Survey Set

The initial MTV survey will be augmented by a second survey, to be released later this year. However, the debate over young people’s car-buying habits may not be over. Indeed, this study flies in the face of what has been accepted in recent years and may be disputed by others with their own pool of data. Regardless, the US auto industry is in much better shape now than it was in 2009 when interest in new car buying was at the lowest we have seen in our time among all demographics.

See Also — MRY Study Reveals That We Still Love Our Cars