When you buy a used car, there are a lot of fees involved that you may not consider making room for in your budget. But you should. Extra charges like tax, title, and license (TTL) fees and dealer documentation fees impact the overall cost of your loan and may even have to be paid out of pocket.
Costs Differ Across the Country
The taxes and extra fees that have to be paid for a vehicle can make a significant difference between the selling price and out-the-door cost of a car. Because the cost of taxes and registering and plating your vehicle vary by state, it’s a good idea to know what you’re getting into before heading to the dealership. Using online tools, such as car loan estimators and tax calculators, can help you determine how much you need to budget for these costs.
Another type of fee to watch out for is a documentation fee, or “doc fees.” These may also show up on your contract as processing fees, and can vary by dealer and state. Some states put a cap on the amount that can be charged by a dealership, while others don’t. Rarely, you’ll get financing where a dealer doesn’t charge a doc fee at all.
Paying Taxes and Fees When Buying a Car
TTL fees aren't something that can be negotiated, so you have to be prepared to pay these costs. If you have good credit, you may be able to roll these costs into your loan. Be aware, however, that adding these to the total cost of financing means you end up paying more interest over the term of your loan. If you’re struggling with credit issues, you might not have the option to add these costs to your loan, so you typically have to pay them out of pocket.
A good rule of thumb is to be prepared to pay your TTL up front – along with your down payment – if you’re financing through a dealer. This way, you’re reducing your loan to value (LTV) ratio and saving yourself money in the long run.
The taxes and fees when purchasing a used car from a private party have to be paid at the DMV or secretary of state office, because individuals aren’t allowed to collect taxes.
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Getting Your Best Price
Unlike TTL costs, doc fees can – and should be – negotiated. Most dealerships usually tell you these fees are non-negotiable, but it’s worth doing, especially if the cost seems outrageously high. Typically, doc fees can run between $100 and $500 dollars, or more. But, because these fees aren’t regulated in every state, some unscrupulous dealers use them as a catchall for adding to their profit.
For example, a doc fee ranging up to $1,000 or more could indicate that there are other costs a dealer is trying to fold into the vehicle, such as recouped costs on a push, pull, or drag trade-in offer. Be wary if a dealer is quick to do away with these charges – it may be a sign that you’re paying too much for your vehicle.
Likely, you’ll be hard pressed to get any dealer to do away with their fees. So, you may want to try and offset these costs by asking the dealer to reduce charges in other areas. See if they’re willing to throw in some of the accessories that they often charge for. Things like wheel locks, floor mats, and cargo nets are all examples of things for which they may be willing to remove the cost.
Don’t Get Blindsided at the End
When it comes to financing a vehicle, know all your costs before you sign the paperwork. In order to make sure taxes and fees aren’t pushing you beyond your bottom line budget, ask the dealer for their out-the-door price up front. This is the amount you want to use to negotiate, because it should include all taxes and fees that you’ll be charged in the end. This way, you won’t be surprised by extra charges being tacked on to the price you’ve agreed on with the dealer.
If you’re ready to get negotiating on your next car loan, but don’t know where to turn, let Auto Credit Express lead the way. We work with an extensive network of special finance dealers that can help you get the lending you’ve been looking for. Simply fill out our online auto loan request form today, and we’ll get to work finding you a local dealer that can help!