How to Buy a Car without Paying Dealer Fees

So, you've saved some money to buy a new (or new-to-you) car. You find the vehicle you want and you've even agreed with the seller's price. If you're at a dealership, wait a second — that isn't the final price. Dealerships add fees for all sorts of things and you'll see it all in the fine print of the contract.

Hidden Costs of Buying a Car

Just behind the purchase of a home, buying a car is the second largest purchase that a person makes in their life. And just like buying a home, there are a lot of costs that aren't written in the window.

Common Fees When Buying a Car

If you're thinking of getting a new or used car this year, you should consider all the extra charges when thinking about your budget. Some dealership fees might seem like they're not a big deal when it comes to the overall purchase price, but these little fees can all add up. Some of the most common fees you're likely to encounter buying a car include:

Finance charges
Sales tax
Registration
Title fees
Other dealership fees, including destination and documentation charges

Let's look at these charges a little closer.

Finance charges

Unless you're buying from a private seller and you're paying in cash, you'll likely have to secure a loan. Loans include finance charges. These fees are on top of the loan amount and based on the current interest rate.

Your current credit score; the make and model of the car you're buying; and the loan terms all determine the loan's interest rate. Paying in cash and buying from a private seller can help you avoid finance charges.

Sales tax

No matter what type of car you buy or where you buy it, the purchase is subject to sales tax. How much your sales tax payment is depends on the state you make the purchase in.

Almost every state charges sales tax, ranging from 0.0% to 11.5% in states like Puerto Rico. Even in states that don't charge sales tax, you may still be responsible for a use tax.

Registration and title

While registration and titling fees vary greatly from state to state, you have to register your car in your name no matter where you live. This means paying fees for registering and titling the car in your name, plus license plate fees. Check with your state Department of Motor Vehicles (DMV) to see how much you might have to pay. You must pay these fees whether you buy from a dealership or from a private seller.

Dealership fees

Nearly every car dealership charges various fees depending on the nature of your purchase. For instance, a documentation fee is basically a charge for the dealership to process your paperwork. Other dealerships may charge prep fees to give your new vehicle an oil change or detailing. If you want delivery from the manufacturer, such as if you're buying a car not yet on the showroom floor, you'll have to pay delivery or destination fees.

While most dealership fees aren't much and they are negotiable, there are some fees you shouldn't ever pay.

Avoid Dealer Fees and Buy from a Private Seller

If you're buying a used car, finding one through a private seller could be a lot less expensive than making the purchase through a dealership. You might find the same make and model you're looking for and yet be able to pay less than you would at a dealership. After all, private sellers don't have the same profit expectations. This gives you a lot more room to negotiate the final asking price.

However, be sure to do your research. In a private vehicle sale, you'll do all the paperwork and transfer the title and ownership yourself. While you won't have access to dealership financing, you most likely will negotiate a price that won't need a loan anyway. Still, without the dealer as a middleman, you also open yourself up for scams.

Private auto sales aren't afforded the same consumer protections. For instance, depending on the seller, your used car probably won't come with a warranty. Plus, if you live in a state where lemon laws only apply to newer vehicles and you haven't created a protective clause in your agreement with the seller, you could have no recourse if the car breaks down after the purchase.

Researching Used Cars for Sale Near You

Buying from a private seller means you won't get to view a showroom floor or dealer lot with tons of cars to choose from, but there are lots of resources to help you in your car search, like PrivateAuto. We're the safest and most reliable option for both selling and buying used cars.

When you find one you like, compare the price to either the Kelley Blue Book value or Edmunds. Knowing the fair asking price of the make, model, and year of your potential new ride helps you understand if the seller's price is fair and can also provide other information that can aid you in negotiations.