Car Buying Advice

Choosing a car:
In this section

• Negotiating by phone
• Check the numbers
• Closing fees
• Watch for these sale pitches

Check the numbers

Whether you’re buying or leasing, you should carefully check all the numbers on the agreement. Use your calculator or, if necessary, borrow one from the salesperson to total them up yourself. Make sure that the contract shows the agreed-upon purchase price or, if leasing, the capitalized cost, and that your cash down payment, trade-in allowance, and any rebate have been subtracted from that amount.

If you are financing the vehicle through the dealer, make sure the right interest rate (or “money factor” in the case of a lease) was used to calculate your monthly payment.

As you check the agreement, you’ll likely encounter various additional charges. In addition to legitimate ones, there may be others that are questionable or entirely unnecessary. As you go through the contract, you can refer to Closing fees: Fair and foul. Remember, unless you pay fees and taxes up front, they’re added to the total package and you will pay interest on them.

Here’s a rundown of some of the major charges you’ll encounter:

Destination charge

This fee covers the cost to deliver the vehicle from the factory to the dealership and is shown on the vehicle’s window sticker. It is set by the automaker and is typically the same for all models within a particular brand. Yes, you have to pay this charge. It’s a straight pass-along cost. Some dealers, however, have been known to sneak in an additional delivery fee, itemized on a second window sticker pasted near the official one. If you see an additional “delivery,” “destination,” or “dealer prep” charge, you should refuse to pay it.

Title and registration fee

The dealer usually arranges with your state Department of Motor Vehicles (DMV) for title and registration documents, and may issue you temporary tags or permanent license plates as well. You’ll have to pay those fees, too, which are fixed by your state.

One thing to look out for: If you are transferring plates from another car, rather than applying for new plates, the registration fee is generally a few dollars lower. Make sure you’re not paying for new plates if you’re not getting them. You can check the fees by calling your local DMV or using its Web site.

Documentation fee

Sometimes called a “doc fee” or “conveyance fee,” this supposedly covers the dealer’s cost for processing the paperwork for the purchase, title, and registration. Some states strictly limit this fee, but most do not. Where it is regulated, it’s often moderate: $50 or less in California, Louisiana, Minnesota, New York, Oregon, Texas, and Washington. In a no-limit state such as Connecticut, where Consumer Reports’ staff buy most of our cars, the fee typically runs from $200 to $300, but we’ve seen it as high as $500. It’s generally preprinted on the sales contract.

We have found it next to impossible to get our local dealers to reduce or eliminate this fee. Instead, we make it one of the final parts of the price negotiation: Get the dealer to reduce the price of the car by a like amount, and let the fee stay on the purchase agreement. Same goes for any “advertising fee.” As a fallback negotiating tactic, ask that some accessory such as floor mats or upgraded alloy wheels be thrown in free of charge.

State sales tax

If you’re buying a vehicle in the state in which you live, you’ll have to pay the sales tax. If you’re buying a car out of state, you’ll pay sales tax when you register the car in your home state. Most dealers can handle registrations in other states, too.

But if you intend to relocate soon after your purchase or lease, or if you’re buying the vehicle for somebody else who lives in another state, you’ll probably have to register it temporarily where you bought it, then reregister it in the new state of residence before the temporary title expires, usually within 30 days. You can claim a refund for the first state’s sales tax by submitting proof that you’ve reregistered the vehicle, and paid tax, in the state where permanent tags are issued.

Advertising fee

Manufacturers charge their dealerships for a brand’s national advertising, and they include that charge in the dealer-invoice price. Regional dealer associations may also levy assessments to cover local newspaper, radio, and television ads, and it has become increasingly common for dealers to pass along a few hundred dollars of that expense to each new car sale or lease. This charge should be disclosed and agreed to before you find it on the closing paperwork. Some dealers list it on a separate sticker posted in the vehicle’s window. If you’re hit with an advertising charge from out of the blue, challenge it and ask to have it removed.