What New Car Fees Should You Pay?

You've skillfully negotiated the price of your new car, and with the help of the Edmunds article on negotiating car prices, you're confident that you're getting a good deal. But when you see the contract, the total is much higher than what you planned on paying. Then you see the problem: The contract contains fees you didn't know about. It leaves you wondering if these new car fees really are legitimate.

To answer that question, Edmunds has created a chart with the most common fees you may encounter when you're buying a new car. In addition, we show how different states charge sales tax on trade-ins and rebates. If you've never used the chart before, it's worth reading about the process first. But you also skip right to the fees chart if you like.

1. What are some common car buying fees?
2. How is the car sale taxed?
3. Are there other car buying fees?
4. 50 state list of dealer car buying fees
5. A final word on fees
6. FAQs

What are some common car buying fees?

How is the car sale taxed?

You probably expect to be assessed sales tax on the amount you pay for your new vehicle, but it might surprise you to learn that there are other tax issues that can also affect your out-the-door cost. Here is how different states handle taxes:

• Trade-in: In many states, if you trade in your old vehicle, you can get a nice tax break. If there is a "Y" in the "Trade-in sales tax credit" column for your state, you are only taxed on the difference between the new car and your trade-in. So, if your new car costs $25,000 and you are getting $10,000 for your trade-in, you will only be taxed on the difference, or $15,000. If sales tax in your state is 10%, this will save you $1,000. If there is an "N" in the column, it means that you will pay tax on the full amount of your new car purchase and the trade-in has no bearing on the sales tax you are charged.




• Rebates and incentives: Customer cash rebates and other incentives reduce the purchase price of the vehicle. But most states charge sales tax on the full purchase amount before the rebate is applied. For a $25,000 car with a $500 rebate, that reduces the sale price to $24,500. But in most cases, you'll pay tax on the full $25,000.

In the chart below, look at the column labeled "Are incentives taxed?" If there is a "Y" in this column, it means the sales tax is based on the car's price before rebates and incentives.

Are there other car buying fees?

Yes. Here are a few other car buying fees that frequently arise and that buyers should know about:

• Uncommon dealer fees: Some dealers write additional fees into the contract and give them official-sounding names, such as "S&H," "PDI," "dealer prep" or even "shipping." Find out early what extra fees you will be charged and negotiate accordingly before you sign the contract. As with doc fees, you might decide to go along with added dealer fees if you're saving money on other aspects of the deal. When in doubt about an unknown fee or term, don't hesitate to ask the dealer finance person.




• Market adjustment. In these days of limited inventory, you're likely to find an "addendum" sticker somewhere on a new car. This is the dealership essentially saying that the vehicle in question is in short supply, and it's raising its price to make some extra profit. This can range from $1,000 to upward of $50,000 on some highly anticipated vehicles. Note that you don't have to pay this fee, but at the same time, the dealer doesn't have to sell a vehicle to you at MSRP. This fee can be negotiated down in some cases, but it will differ based on the dealership. Similarly, there are a number of dealerships that do not believe in marking up a vehicle. Ask if a vehicle has been "marked up" before visiting it and be willing to expand your search if need be. For more information, read: "Should You Pay More Than MSRP for a Car?"




• Dealer-installed options: on the same addendum sticker, you may also run into a list of accessories that the dealership added to make an extra profit. These aren't necessarily a "fee" per se, but they are something to be aware of that can add thousands to the price of a vehicle. Read "Negotiating a Dealer's New Car Add-Ons" for more information on how to handle these.




• Advertising fees. Sometimes buyers look up invoice prices on Edmunds and find they don't match the invoice price given by a dealer. What's going on? There might be an advertising fee attached to the invoice price of the car. The advertising fee listed on a car's invoice is an actual charge made by the manufacturer to the dealer, and you should pay it. However, some dealers will tack on an extra "unofficial" advertising fee into the sales contract, perhaps claiming they are offsetting the cost of their own advertising efforts. If you encounter this type of fee, you can challenge it or negotiate a lower purchase price on the car to offset the charge.

50 state list of dealer car buying fees

A final word on fees

While this chart helps estimate fees, don't expect that it will allow you to calculate your final cost to the penny. Registry fees in particular are tricky, but DMV websites in many states have calculators to help guide you. Additionally, many states have nominal charges (less than $40) under local environmental laws. Still, this chart will tell you roughly what to expect and help you budget accordingly.

Ultimately, you'll want to pay attention to three items when purchasing a car:

1. Anything with a dollar figure and where you need to sign. Especially on the sales contract.
2. The deal's overall cost. Sometimes we get stuck on reaching a desired monthly payment, and we overlook other aspects of the deal, such as the interest rate and loan term.
3. The federal truth and lending disclosure. This document should be present on every car deal. It outlines the most important parts of the loan, such as the interest rate, total payments and the finance charge.

Finally, doc fees and sales taxes can change from year to year. Edmunds updates this information regularly, but let us know if you come across any information that's out-of-date.

Footnotes:

1. Maximum sales tax: Often you pay a combination of state, county and local taxes. This is the estimated maximum tax you should be charged, depending on which city you live in.

2. Average DMV fees: This data is for new vehicles only. These are unweighted state averages. The data is valid as of May 17, 2023.

3. Trade-in sales tax credit? A "Y" in this column means that you will pay sales tax only on the difference between your new car purchase and the value of your trade-in. An "N" in the column signifies that you will pay tax on the full amount of your new car purchase.

4. Are incentives taxed? A "Y" in this column indicates that the buyer will pay tax on the purchase price before the manufacturer rebate is applied.

5. Doc fee limits: This will tell you if the documentation fee is regulated by the state and the maximum allowed amount.

6. Median doc fee: This is the typical amount you can expect to pay for a dealer documentation fee. In this case, we've provided the median amount charged per state, rather than the average, because we think it gives a truer representation of what most buyers will pay. The data was collected on May 17, 2023.