Posted by: Howard Dvorkin, CPA
Date of post: February 26, 2018

Fortunately, you can negotiate most of them if you follow this advice.

Imagine going to the grocery store to buy apples. You saw an ad in your local newspaper that touted, “Our lowest price for apples this year!” The price tag on the apples reads, “a dozen apples: $2.”

You take your dozen apples to the checkout line. The cashier rings you up and says, “That’ll be $3.12.”

Shocked, you ask for an explanation.

“Well, sales tax is 12 cents,” the cashier says. “The extra dollar is our documentation fee. That covers doing the paperwork so we can sell you the apples.”

You scowl but pay up.

“Do you want a bag to take home your apples?” the cashier asks. “Because that’ll be another 50 cents.”

Of course, that never happens — except at car dealerships, where it’s an everyday ripoff.

Paying for paperwork?

Among the ridiculous fees you’ll pay at a dealership: a doc fee or a conveyance charge. Theoretically, this fee covers the cost of the “paperwork” to transfer the vehicle from the dealership to you. In reality, it’s mostly profit for the dealership.

How do I know this? Because 11 states legislate this fee, capping it as low as $75, as you can see from this map…

Yet in states where the documentation fee isn’t capped, it can climb to nearly $800. Who’s filling out this paperwork? Warren Buffett?

What you can do: The dealership will tell you this fee is non-negotiable. So negotiate elsewhere. It’s quite common for savvy shoppers to demand, “Well, if I have to pay hundreds extra, what else can you do for me?” Be prepared to walk away on principle, and watch the dealer fold — because you’ll have wasted a few hours, but he’ll be out thousands of dollars.

Pay for the advertising?

Some dealers charge an advertising fee. That’s right, they want you to pay for this basic cost of doing business. As a business owner myself, I find this patently offensive. Should we also charge our customers an electric fee (for the cost of turning on the lights) and a water fee (for providing our employees with running water)?

What you can do: If this is actually on the window sticker of the car you want, ask for it to be removed. If you’re hit with it while signing the paperwork, point it out and cry foul. Usually, if dealers are trying to sneak it in, they’re willing to remove it — if they get caught. You’d be surprised how often they’re not called on it.

Paying for nothing?

The most offensive of all dealer fees is called the dealer prep fee. When you ask what it’s for, you hear this: “Well, it’s to cover the cost of filling your oil and fluids, washing it, and cleaning the inside so it’s in tip-top shape when you drive off with it!”

Imagine if your grocery store charged you for washing the apples — and even passed on the cost of the farmer who watered the apple tree.

In actuality, it takes 1-2 hours for a dealership to prepare the car for you. Even if you agree to pay for that, it doesn’t total hundreds of dollars.

What you can do: Thankfully, the most ridiculous fee is the easiest to negotiate away. I’ve known customers who have literally arched an eyebrow and simply said, “Really?” Poof, it’s gone. Again, stand up to the dealer. They know it’s a bogus fee. let them know you know.