Buying a new car can be quite the ordeal, especially if complicated financing is involved with subsequent monthly payments and other transactions fees that are unfamiliar or unknown to a buyer. There are going to be fees added into a contract for a vehicle, and car buyers need to know which ones they should pay.
There are any number of standard fees that are part of a new car contract, so what are some of those basic fees that every car buyer should know about before purchasing a new vehicle?
Vehicle registration fees are determined by the state in which a new car owner resides. The fees include the registration and license plate costs. A registration is a document that indicates legal ownership of a vehicle. Car dealerships take care of this service, so new car customers are spared a visit to the DMV (Department of Motor Vehicles). The newer and more expensive the vehicle as well as the weight of the vehicle will determine registration costs.
This figure can produce sticker shock to many new car buyers. Sales tax varies by the state in which a new vehicle is purchased. In addition, many cities and counties tack on an additional tax along with the state tax. So, the total amount of sales tax paid will depend on where the vehicle is purchased within a state.
There are incentives with sales tax, particularly with trade-in situations and the purchase of a new car. If a trade-in sales tax credit is given by a state, a new car buyer is only taxed on the difference between the price of the new car and the trade-in value of the old car. Some states do not allow for the trade-in allowance and the full amount of sales tax will have to be paid on the purchase of the new car.
Rebates and other incentives can lower the price of a vehicle, but many states will still charge sales tax on the purchase price of the vehicle before any rebates are applied. So, a buyer still pays tax on the full price of a vehicle in spite of the rebate.
This is one aspect of the fee process that can fluctuate. Car dealerships include charges for documentation (doc fee). The charges are to cover preparation and sales contract filing costs and any other extraneous paperwork. Some states have document fees that are not regulated. One car dealership may sell a buyer a vehicle at a decent price but, at the same time, include a high document fee to offset any customer savings, plus that document fee will likely have a sales tax attached to it. Would-be new car buyers should investigate what dealerships charge for document fees. Any fees that are higher than average for a state should be negotiated to offset the fee.
Document fees definitely affect the new-car buying experience and if a car dealership provides genuine and helpful service, perhaps the document fee won’t be such a sting. Also, if the vehicle purchase price is lower and the dealership is giving a true savings to the customer, there may be a gain there, even with a high document fee.
Other fees attached to a new car buying experience can include dealer fees, advertising fees and environmental fees for laws that concern local environmental rulings.
Dealer fees could arise in the form of dealer preparation and shipping and handling type of charges. Investigate these fees and, if necessary, challenge the fees in contract negotiation with the dealership.
Advertising fees could be listed on the vehicle’s invoice, which is an actual charge by the manufacturer of the car to the dealer; however, some dealerships will include an additional advertising fee within the sales contract itself as a way to offset their own advertising endeavors. In any case, negotiate these dealer fees before entering any contract.
Environmental fees are levied by individual states and are nominal, usually around $40 or less.
Online Fee Calculators
There are online calculators available to determine or estimate fees that relate to buying a new car. DMV websites and other online sites provide calculators for guidance through the fee process and can give a new car buyer an idea of what those fees will entail. They are not exacting, but they do give a general idea as to charges in different states.
There is no doubt that buying a new car is going to involve a fee structure that may be hard to follow or is unclear. If you plan on buying a new car make sure you are prepared for the fees you will face.