Lets face it, there are only a couple of purchases you’ll be making in your life that take a lot of thought, and planning. When you’re spending thousands of dollars on one specific item, it’s not something to take lightly.
Purchasing a house would be your #1 most costly purchase, and 2nd would be a new, or new to you vehicle. Cars aren’t as cheap as they used to be, just like everything else in this world, prices have inflated.
Knowing what to look for when sitting down at the dealer, and getting ready to sign those papers to make that car your own is a very important part of the process.
After you have negotiated the price of the car, it is just as important to read the fine print that comes along with signing the documents that state how much you will be purchasing the car for. If you aren’t careful, or knowledgeable in this process, you can actually lose money instead of getting a great deal on your new purchase.
There are some fees that you have to pay when purchasing a car, such as Tax, Title, Licensing, and some destination charges. However, dealerships will add on their own types of fees, this allows them to pass along their cost of said fees to the customer. In their own way they are having you pay for things they should be paying for.
Let’s make sure you are educated in what you really should be paying for, and what you should not be paying for.
What You Should Be Paying For:
The fees I am about to tell you about are normal fees that come along with the car buying process, and they are not negotiable.
First: Title and Registration Fee
When you purchase that new car, it has to be titled and registered into your name, many dealerships will take care of this process for you. Registering the vehicle with states DMV or Department of Motor Vehicles is a requirement and a fee that you can not get away without paying, as these things are required by State Law. The dealer will collect this fee from you and then submit it for you as well. Basically you are paying them to handle all of that, instead of you having to do this yourself. They will also take care of getting your new plates during this process as well.
Second: Sales Tax
Just like anything else in this world that we purchase, that shiny new car of yours will also have sales tax that needs to be paid. No way around this one at all. Sales tax varies by state, so you will need to look up what your state requires from you when you purchase a car. Keep in mind as well, the sales tax rate is also not negotiable.
Third: Destination Fees or Charges
The destination fee, or destination charge, dealers will call this one or the other, covers the cost the dealership pays to get the car delivered from the factory. That’s right, those cars aren’t delivered to the dealers for free, they still have to pay a price to get them on their lot. These destination fees or charges can not be negotiated. Even if you choose to pick up your shiny new car from the factory itself, they can still charge this fee to you.
Last, but not least: Documentation Fees
When you purchase a car, there is a ton of paperwork that goes into the deal. From the papers you sign, to the papers that are needed to register your car, someone has to prepare and send all this for you. The dealer has to add on a documentation fee, or they may also call it a processing fee, handling fee or conveyance fee.
Different states handle how this is charged differently so do some research before heading off to the dealer for that new car. A lot of states will put a cap on how much a dealer is allowed to charge for this fee.
If you find the fee is too much for you, you can always try to negotiate the sales price down a bit to offset these fees.
With all these fees that you can’t get taken off of your deal, you also need to be aware of the fees you can use to negotiate with.
Fees That Might Be Negotiable
You’ve spent who knows how long hunting down that perfect new car, you’ve done the test drive, you have dealt with the sales person, and now it’s time to take care of the financing part of the process.
Here is where your power to negotiate comes into play. They take you into what they call the F & I Office, aka Finance and Insurance, here they will help you secure a loan for the car, unless you have already done this yourself prior to this moment.
In this office is where you are able to negotiate the cost, knowing that you can always say no to everything and still leave with your new car. They will try to upsell you on everything possible, but that’s the beauty of it all, this is all in your hands.
First: Advertising Fees
That’s right, the dealer is trying to offset their cost of having to advertise, whether that be by TV ads, radio ads, or any other form of advertising, they are trying to pass this along to their customers.
Keep in mind, if you go to a big name dealer, say Ford, Chevrolet, ect, those dealers get an advertising budget from those manufacturers, but still try to double dip when they can.
This is something you can try to negotiate out, but keep in mind this one could go either way. However, this may play into your favor as most places will try nearly anything to not lose a sale.
Second: Dealer Preparation Fee
This fee they slip in on you as well. I mean, you’re buying a new car from them, so shouldn’t the wash and detailing be a courtesy feature, just my thoughts on that. So keep an eye out for this one in that fine print section of your contract.
Third: Extended Warranties and Maintenance Plans
This one here is my personal favorite. Be careful to make sure you understand your manufacturer warranty on your new vehicle first. This maybe something you don’t even need. If you already have a 6 year/100,000 mile warranty why would you need to purchase a warranty that covers the exact same time frame and miles as the manufacturer warranty already does. Yes, an extended warranty is a good thing to have when the time comes and your manufacturer warranty is expiring. This can definitely be opted out of, or negotiated down.
Fourth: GAP Insurance
GAP Insurance is not negotiable whatsoever, but this is a completely optional purchase for you. This isn’t something that you have to have in order to walk out the door with your new car.
If you didn’t already know, the moment you drive your new car off the lot, it has already begun to depreciate in value. What GAP Insurance is good for is that it covers the difference between your loan and the value of your vehicle if it’s totaled or stolen.
Say you were to get into an accident, or have your car stolen just a week after purchase, your insurance company will only cover the cost of what the estimated value of the car is. They will NOT cover the amount you still owe on this car. That’s where the GAP comes into play.
Though it’s an optional purchase when buying your new car, it is still a good thing to have, because you never know what life may throw at your new ride.
In Conclusion:
It is just as important to know the amount you are willing to spend on your car, as it is to know what you can and not not negotiate when purchasing. IT’s always best to go into a large purchase with all the knowledge at your fingertips.
Being prepared, and knowing where you can save some of your hard earned cash is very important, wouldn’t you agree?