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Understanding Dealer Fees When Buying a Car

August 18, 2021, ATC API, Automotive Industry, Out of State, Titling

Buying a car can be a frustrating experience. The process is complex, time-consuming, and for many people, filled with fees they don’t understand. Since ATC exists to provide accurate tax, title, and registration fee information to make the car buying experience easier, we thought we’d cover all the fees that are part of most car buying transactions.

Finance Charges
Since most people don’t pay for their car in cash, they must secure a loan. A buyer’s credit score, the loan’s term, type of car, and down payment all help determine the rate the buyer pays to finance their vehicle.

Destination Fee
This is the cost the dealership must pay to have the car delivered from the factory to their showroom. This is a fee that cannot be negotiated.

Transportation Fee
If a buyer wants a model not available at the time of purchase, and the dealership must transport it from another location, a transportation fee will be charged.

Documentation Fee
The document fee is sometimes called a processing fee, handling fee, or conveyance fee, and covers the cost of preparing all the paperwork required for selling a car. Some states have a cap on document fees or require that the dealership charge every customer the same fee.

Preparation Fee
The prep fee is the cost of getting your car ready and may include washing the car, removing the plastic covering from the interior and exterior, and filling up the gas tank.

VIN Etching
A dealership can etch the vehicle identification number, or VIN, on the windshield to deter car theft.

Credit Insurance
Credit insurance can help cover the remainder of a car loan after an accident, and some policies might also help if the buyer becomes disabled, loses their job, or dies.

Gap Insurance
Gap (guaranteed asset protection) insurance may be required if leasing a vehicle. It covers the difference between the loan and the value of your vehicle if it’s totaled or stolen.

And we might be a bit biased, but the most important fees when buying a new vehicle:

Title and Registration Fees
Dealerships handle the process of registering the vehicle with the buyer’s motor vehicle agency, assigning the car’s title and ordering the license plate. The dealer collects this fee and submits it to the state motor vehicle agency. (Made really easy if they work with ATC!)

Sales Tax
Most states have a sales tax on vehicles, and it must be paid when you buy a new vehicle. The sales tax varies based on the state in which the buyer would like to register the vehicle and if buying a car in a different state, the dealership may be able to register the car in that state and submit the sales tax to that state’s motor vehicle agency. (Made really easy if they work with ATC!)

ATC provides dealers, lenders, and auto technologies accurate tax, title, and registration data for in-state and out-of-state vehicle titling and registration. Contact us for more information about how our technology helps increase car sales and remove friction from the car buying experience.

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