Debunking Dealer Fees: When Do They Become Non-Negotiable?
When purchasing a car, you may come across dealer fees that are not required by law. These fees can range from $400 to over $500, or even more, in some states. This article explores whether dealers are obligated to waive these fees, analyzes why these fees exist, and provides practical advice on how to negotiate them.
Are Dealer Fees Obligatory?
Contrary to popular belief, dealers are not obligated to waive these fees. Both parties must agree on the deal. If you do not like the fee, the dealer may reduce the car's price by the amount of the fee to achieve an agreed-upon out-the-door price. However, they are not required to waive the fee. If the dealer insists on keeping the fee, you have the right to walk away from the deal.
Understanding the Fee Structure
The existence and structure of these fees can be confusing for many buyers. In reality, all those so-called dealer fees are nothing more than a clever marketing ploy. The only actual fees are those imposed by government sales tax and registration.
The dealer fees were invented by dealers many years ago for two main reasons:
By separating the price into two parts, dealers can advertise a lower price, hiding the fee in small print. This ploy aims to entice potential buyers to the dealership or website, increasing foot traffic and interest.
Increasing profits: By separating the price and fee, dealers hope that buyers will only negotiate the price and simply accept the fee. This increases the dealership's revenue without any additional cost.
In states with minimal oversight, like Florida, paying hundreds of dollars for what is essentially a red herring can be seen as a waste of money.
What Dealers Are Required to Disclose
In Maryland, for example, dealers must state on the paperwork or advertising that the fee is not required by law. However, many dealers have already printed the fee on the contract. If questioned, salespeople may say that they are required to charge this fee to everyone. But this claim is misleading.
The reality is that dealers are not required to charge such a fee by any law, regulation, or practice. The true reason is that the dealer’s lawyers mandate the fee on every deal to avoid legal issues. If they do not, the dealer may face a lawsuit for disparate treatment.
Negotiating and Adjusting the Price
The most effective method to deal with these fees is to adjust the price to compensate for the fee. For example, if you agree to pay $25,000 and the dealer has a fee of $300, you should offer $24,700.
Consider the actual cost for the dealer to prepare and submit the documents. All the necessary documents are prepared and completed before the buyer leaves the dealership. This is done in the finance and insurance (FI) office. The dealer only needs to send the documents to the motor vehicle administration (MVA/DMV), which is done electronically or as part of a batch with other dealers.
By negotiating and adjusting the price, you can ensure you are only paying for the necessary costs, not misleading fees that benefit the dealer financially.
As more buyers become aware of these practices, dealers are under increasing pressure to stop using this game. By standing up for yourself and not paying these fake fees, you can help drive the change.