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What is a Dealer Fee?

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  • Written By: Lori Kilchermann
  • Edited By: Lauren Fritsky
  • Last Modified Date: 07 September 2016
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A dealer fee is implemented to cover the cost of doing business for the new car dealer. Many of these so-called dealer fees can be negotiated out of a car deal; however, some of the fees cannot be negotiated and are here to stay. In many cases, the dealer fee is simply a method used to generate additional profit in a car deal. When negotiating with the salesman, individuals should work the best deal possible and then ask that the dealer fee be cut from the price.

In some states in the US, the dealer fee includes a documentation fee. Most car dealers will not negotiate this fee, which is intended to cover the cost of the paperwork that is generated when selling a new car. Some dealers will also attempt to charge this fee when selling a used vehicle. This is typically a ploy to generate additional monies at the time of the sale. A well-prepared car buyer that is willing to stand firm on the exclusion of this fee when purchasing a used vehicle will usually succeed in having it struck from the deal.

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Transportation fees and charges will also occasionally fall under the dealer fee. While there are legitimate transportation fees charged for delivering a vehicle to a dealer, there are often two or more attempts at charging this fee to the consumer. Careful examination of the sales contract will reveal any additional charges, and they should not be paid. The additional charges are added profits disguised as a dealer fee in the contract.

Many dealers charge fees that pay for their taxes as well as for meaningless charges that are nothing more than profit additions. One dealer fee that is only intended to add profit margin into a car dealer is the additional dealer markup, or ADM. This is often used on special-edition or sports cars. This is nothing more than an inflated price that the dealer feels the public will pay for the vehicle. The importance of this price to the dealer is that even if a savvy buyer deals this price down, the customer still had paid in excess of the sticker price for the vehicle.

Many fees are explained by the sales team as a method to give the consumer added value. This should always be a warning that the fee is not justifiable. Also, any dealer fee that cannot be explained by the salesman should be a warning that an improper fee is being charged.

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