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Dealer Fees that Increase Your Auto Loan Cost but Don’t Need to Pay

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In Los Angeles, auto loans may not be cheap but they aren’t—and shouldn’t be—too expensive. More often than not, it is the dealers that make financing more pricey than they should be. They do this with a number of additional costs which you don’t even need to pay. So when you buy a car, pay attention to the invoice and watch out for the additional expenses listed below.

 

Documentation Fee

This fee is for the handling of paperwork related to the car (i.e., car registration) and its purchase (i.e., obtaining your credit score). It is quite ridiculous if you seriously consider what you are being asked to pay for—it is like being charged extra at the supermarket for the receipt and the bagging. Costs of documentation are already covered by the purchase price of the vehicle.

Unfortunately, this ridiculous expense can increase your loan amount by a significant sum: what is claimed by dealers as a standard fee can cost as much as $400. The amount to be charged vary from state to state. The fee may be legal, but you need not shoulder it. Negotiate on a bottom line price for the vehicle and leave the paperwork expenses to the dealer. If the salesperson doesn’t budge, ask for a breakdown and pay only what the dealer really spent on.

 

Dealer Prep Fee

As the name suggests, this fee covers the dealer’s preparation of the vehicles for car buyers. Preparation in this sense entails washing the cars and putting oil in them, among other things. You should refuse to pay this fee because it is the dealer’s job to do the prep: if they wanted to sell cars, they better make sure the merchandise is ready for viewing and buying. In addition, manufacturers pay dealers for the costs of preparation.

 

Advertising Charge

This fee covers the amount the dealer spends to advertise the car. Just like the dealer prep fee, this is something you shouldn’t pay for. Advertising costs are included in the costs of doing business, and shouldn’t be passed on to customers. Tell the salesperson outright you aren’t paying for advertising, which can cost you hundreds of dollars. Also referred to as destination charge, this is yet another cost of business that dealers charge to car buyers to put more money in their pockets.This covers the cost of having the car delivered from the factory to the dealership. The money pays for the service of having trucks or freight trains bring in stacks of new vehicles to their intended destinations. The delivery charge is the fee automakers charge the dealer to transport new vehicles from the factory, but later passed on customers.

Unfortunately, destination charges are government-mandated. Because the fee—which can cost between $400 to $800—are fixed, you may not be able to negotiate for it. The only thing you can do is check the invoice and make sure only one appears: either a delivery charge or destination charge. It cannot be both.

 

Add-On Services

Dealers make lots of money each year with add-ons customers don’t really need. These include fabric, paint and rust protection. These unnecessary services can add a hefty amount to your loan, making your debt bigger than it needs to be. Know that the car manufacturers have already put the aforementioned in your car, so there is no need to avail them from the dealer. However, if you think you need additional protection, you should seek them elsewhere. Pay for them apart from the loan.

 

Extended Warranties

Extended warranties are costly and often do not offer much coverage. You will be paying a sum between $800 to more than $1,000, but the warranty protection you will get is worth less than what you pay for. Say no to these at the dealership. Instead of opting for an extended warranty, just get a car from a seller that offer basic bumper-to-bumper warranty and power train warranty which exceed 36 months (or 36,000 miles).

 

Additional Dealer Mark-Up (ADM)

This is the one charge you should definitely say no to, as this is an amount charged solely for the purpose of making more profit. Refuse to let the dealer take extra money from you, or better yet, choose another dealer that doesn’t charge this.

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