Which Dealer Fees Are Legitimate?

With all the horror stories regarding dealerships, it's good to be skeptical when it comes to all the extra fees associated with a car purchase.

There are certainly some legitimate fees that dealers have no control over, but in today's market many dealers try to profit by simply making up fees - kind of like the "convenience fee" charged by some companies. Especially with supply constraints, dealers have been marking up vehicles which are in high demand and low supply.  

Let's first take a look at all the legitimate fees:

Legitimate Dealer Fees You Should Pay

1. Tax, Title, License

   All dealerships charge tax, title, and license fees (also referred to as registration fees). These go straight to the government and will vary depending on your state and city. The title and license fees go toward securing your title (proof of ownership), registering for a license plate and getting you setup with temporary tags. The dealership does not keep any of these fees, but rather pays them directly to the state, saving you a trip to the DMV.

2. Dealer Documentation Fee

   Also called the "Doc Fee", this is the amount a dealer charges to complete all the paperwork related to the sale of a vehicle, including the sales contracts, filings with the DMV, and any other paperwork. Some states put a limit to how much a dealer can charge, but others have no cap - resulting in each dealer charging a different amount. Doc fees typically range between $55 and $700 and are usually non-negotiable. Here's a list of average doc fees charged in each state.

3. Destination Fee

   This is a shipping fee charged by the manufacturer to transport the vehicle from the factory to the dealer lot. These fees are usually around $700 to $1,000, and all dealers pass the cost on to the consumer. The Destination fee is always listed on the MSRP window sticker and is also included in the vehicle invoice. Make sure the dealer includes the destination fee when they quote you a price on a vehicle. For example, if a dealer quotes you "$500 under invoice", make sure the price includes the destination fee.

4. Regional Ad Fees

   Some dealerships charge a regional advertising fee, which although it sounds fishy, is actually a legitimate fee. It may not seem fair, but certain manufacturers add fees to each vehicle to help pay for regional advertising and promotions. The fees usually range between $100 and $400 and a couple of examples are TDA (Toyota Dealer Advertising Fee) and MACO (Market Area Co-op Advertising Fee). One important note: In order for these fees to be legitimate, they MUST BE listed on the vehicle invoice. If a dealer tries to tack on an advertising fee not listed on the invoice, then they are trying to pad their profits.

5. Other Fees

   You may see other fees such as "Admin Fees" or "Fuel Charge" fees. These are legitimate fees ONLY if they are listed in the manufacturer invoice.

B.S. Fees - Bogus Dealer Fees You Should Not Pay

In the past, there weren't many dealers that tried to pass on fake fees, but ever since we started having inventory shortages during the pandemic years, bogus dealer fees have sprung up like wildflower. Here are the fees you need to watch out for.

1. Additional Dealer Markup

   Dealers use all kinds of official looking acronyms to pad their profits with fake fees. The most brazen are the ADM Fees (Additional Dealer Markup) - simply an additional profit for the dealer. When there is more demand than supply on certain models, you will see these additional markups.

2. Dealer Prep Fee

   This is a fee, usually ranging between $100 and $400, that a dealer will try to charge for preparing the vehicle for sale. It's a ridiculous attempt at making extra profit because vehicle preparation is simply a part of doing business. Get the dealer to drop this fake fee before agreeing to purchase.

3. Additional Fees

   If there are any fees NOT listed in the official manufacturer invoice, this is more than likely a made-up fee that you should refuse to pay.