States with costliest, cheapest new-car fees
Fees such as taxes, registration and dealer processing vary greatly by region -- and can cost you.
If you live in Alabama, Arizona or Colorado, you’ll probably pay more for a new car than in other states. And if you live in Oregon you’ll pay a lot less -- the lowest in the country, in additional fees at least.
That’s in large part because the Beaver State doesn’t have a sales tax, but it also has low registration and dealer documentation fees. And such fees can significantly raise the purchase price of a car depending on your location, according to a recent study by MojoMotors.com
The study looked at what car buyers in each state pay in fees above and beyond the purchase price of a new car and found that in most states it's more than $1,250. That's about the cost of that expensive option package you decided to pass on since it was too pricey. The study also categorizes the 50 states according to a color-coded map to show what these extra expenses average across the U.S.
And while state and local sales tax would seem like the largest add-on to a new car purchase, registration and dealer fees can also take a big bite out of your car-buying budget.
Some state taxes can be as high as 9 percent on a vehicle purchase, although Oregon, Delaware, Montana and New Hampshire have no state sales tax. MojoMotors.com also included the average local sales tax in its analysis, which can vary within each state.
And don’t think that if you live in, say, Oregon’s Pacific Northwest neighboring state of Washington you can save money by buying across the border. You’ll have to pay taxes in the state where you register the vehicle, not where you purchase it.
MojoMotors.com also found that the average fee for registering a vehicle and getting a license plate and title vary from as low as $20 to as high as $600. The same applies for average dealer documentation fees, which can range from zero dollars to $600 and are charged to cover the cost of filing, copying and processing paperwork involved in a purchase. Some states cap these fees by law, but in others it’s not regulated.
MojoMotors.com lists the six most common dealer fees. Many of these are negotiable and not always necessary, like a “prep fee.” So read the fine print before you buy.
I'd like to shoot the person in the head who came up with "documentation fees" which didn't exist 30 years ago.
Car dealerships are in the business of selling motor vehicles. Part of that process is documenting the sale with the state. Filling out the paperwork to accomplish that process is part of the cost of doing business. If they don't like filling out the paperwork, go into another business. I'm NOT going to pay someone to do that. Give me the paperwork and I'll take it to the DMV myself!
Documentation fees are nothing more than ADDED PROFIT!
As for this article, I don't know where they got their numbers. The average vehicle purchase price is around $30,000. In California taxes, license and other graft total about 11%, which equates to $3300 for the state.
As my dad used to say, "the state makes more money on the sale of a vehicle than the dealer does and they don't have a dime invested!"
Folks need to recognize those pesky document fees are not real fees. They are not required by law nor by the manufacturer. They are simply part of the selling price of the vehicle. Dealers learned a long time ago to split the selling price into two components, price and doc fee. In reality, price and doc fees are the price.
There is one caveat about doc fees. For legal reasons, dealers must show the doc fee as being paid on all deals. If they do not they run the risk of being sued for discriminatory selling practices. However, just because the doc fee is printed on the contract does not mean a buyer has to pay.
Smart buyers consider the fees in their offers, they reduce the offer by the fee. Alternatively, they may have the dealer reduce the selling price after it is negotiated by the amount of the doc fee. Or perhaps they could have the dealer increase the value of a trade vehicle to compensate for the fee They could even have the dealer throw in some wanted extras at no cost. They bottom line is there is no need to pay a doc fee. If one dealer won't budge there is always another dealer.
It is important for buyers to understand they can never be sure they have the best deal from a dealer until they make that dealer believe the buyer is waking out the door. The last thing a dealer wants is for the buyer to leave and it is doubtful the dealer will let an otherwise solid deal walk away over a bogus doc fee.
In the end the selling price includes all dealer costs, manufacturer's freght and dealer profit. Dealer cost includes all costs including any cost for a $14 an hour clerk to prepare the paperwork related to a sale. With today's computer driven environment, this process likely takes 30 minutes or less. Does any one seriously believe they should pay hundreds of dollars for something that costs a dealer a few bucks?
Only someone in the car selling business would attempt to justify a doc fee of up to $900 (Florida) by arguing the cost of preparing the documents justifies that bogus fee.
Here's another little tidbit.
How many people know that the "dealer invoice" is NOT what the dealer actually pays the manufacturer for the vehicle in the end. It's what they finance under "flooring" loans from banks.
Lets say the LIST price is $30,000 and the "dealer invoice is $28,750. From these numbers it looks as though the dealer only makes $1,250 if he sells the vehicle for full price immediately.
However, the is a little item called "dealer holdback". In the case of Ford Motor Co. it's 4% (at least it was). After the vehicle is sold, Ford pays back the dealer so that the ACTUAL cost of the vehicle was $26,800.
Of course the dealer has to add to this any interest he's paid on the flooring loan.
This article, and these outrageous fees and taxes don't mean so much to people who buy junky old cars.
I drive three or four cars that cost me much less in total cost than these ridiculously high taxes and fees.
While I feel your pain, you would be paying that fee regardless of whether it has a name or not. If they did not specify it as a "documentation fee" it would just be rolled into the price of the car. No matter how it is labeled you are going to pay for that paperwork to be done. Any smart business makes sure that the costs involved in paperwork are being covered. Other businesses have delivery fees, fuel surcharges, equipment use fees, handling fees, minimum service call charges etc etc. Anyone that is in business to make a profit is going to cover every bit of cost involved in operating that business. Breaking down the fees allows them to show you everything that they are charging for plus enables them to show the price of the car itself as low as possible. All games, no doubt.
Could they maybe give you some of the paperwork to you to handle your self? Probably. But remember, they are trying to make the sale as easy as possible for you so you have a "good experience" and will return/recommend them. None of this makes it any less frustrating though.
Regardless of how the numbers are itemized you should always negotiate the total amount you are financing or paying for a car. If that is a price you feel is fair then it shouldn't matter if there is a doc fee. Car dealerships are in business to make a profit just like any other business. It is how American citizens stay employed and are able to feed their families. This is not the industry it was 30 years ago where the Dealership had all of the information an ammunition and the buyer had none. Today's buyer has been empowered by the internet and all of the tools to assist in making a smart decision when purchasing a vehicle.
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