Three Reasons You’re Paying Hidden Dealer Fees

Doc fees. Processing fees. Finance fees. Even fees with weird initials instead of names that may or may not be named after the dealer’s dog.

Car dealers have a well-deserved reputation for charging extra fees over the price you see on the sticker. These add-ons can add $1,000 or more to the price of the car, and dealers have only grown more aggressive about them as profit margins on the metal itself have fallen. (Full disclosure: I’ve owned my car dealership for well over 12 years now — but my prices are all inclusive. I don’t charge fees, and I tell folks not to pay them.)

Those fees come in a variety of flavors — delivery, document prep, VIN etching, even advertising fees and “protection” for things that are fairly well protected from the factory, like the underbody and seat fabrics. 

But this rising tide of fees hasn’t stopped car sales from surging to levels not seen in several years. And that’s because of three things about our carbuying culture that work against the thrifty consumer:

Americans tend to focus only on the big numbers.

I’m sure many of you have negotiated a deal for a rental property. They ask $1,200 for an apartment or a house, you may counter with $1,000.

But let me ask you. Did you also negotiate the amount of your deposit?  Or the application fee? Chances are if you can easily afford these smaller costs, you probably did not. The same is true for re-financing on your home. Most folks will receive an estimate on the closing costs. But if the amounts in the final paperwork come out $500 to $700 ahead of those costs, they still sign on the dotted line.

People say they will always stick with a specific number no matter what. But if the smaller numbers in particular seem reasonable, they won’t negotiate them so long as the deal seems reasonable. The American culture is unfortunately used to a degree of fudging and guess-timation, especially when the payments are spread over 72 months rather than all at once.

Every state has varying laws on what fees car dealers can and can’t charge, and how they have to disclose it; many states have no limits, while in California dealers can only charge $80 max for shuffling paper. Generally speaking, you should eyeball every add-on, and question how they affect your rock-solid total, especially if they’re not disclosed until the end.

Most of us are victims of a ‘give and take’ mentality

If I go out of my way to drive down the price of your next dream car to right near where you want it, and even beat it buy a few dollars, you probably won’t sweat the doc fee. I may even add another ingredient to the recipe by finding better financing for you, or telling you about incentives that drive the price down.

If I give you a lot over the course of hours, you will usually give a little in a few minutes towards the end.

Reciprocity is a big influence when it comes to negotiations, And over half of Americans still like to negotiate a car deal according to a recent study by Autotrader.com – with women and Millenials leading that pack. 

Yet most people stink at bargaining for themselves. The overwhelming majority of us are not used to negotiating when it comes to goods. And most professional dealers work hard to offer a pleasant experience when it comes to your next car. We want you to willingly pay more, and obviously negotiate a lot less, but be happy when you leave the store.

Good dealers know how to balance your desire for a given car with the opportunity to use time to gradually wear you down. As a result, most car buyers tend to drift and focus on the big battles in the beginning, while ignoring the little ones in the end. 

Fees are now commonplace

That $19.99 oil change which used to truly be a $19.99 oil change now has a $3.50 waste disposal fee attached to it. Many people happily pay a nickel for every plastic grocery bag they use. Banks in particular have helped transition Americans into a fee-happy marketplace; On average, there are now 30 banking fees that are charged for checking accounts, with some banks now charging as many as 50 unique fees.

This fee-oriented world is compounded by the fact that nearly all dealerships now charge a fee or two regardless of the real costs involved. You want to buy a new car? Good luck doing it without a fee. The same is true for nearly all used car dealerships. Even nationwide no-haggle dealerships that pride themselves on customer service have received millions in doc fees over the years.

So long as you’re willing to pay that fee, dealers will continue to be more than happy to offer it. If you’re buying a car, check out what fees your state allows, then be ready to draw the line yourself.