Why Don’t Car Dealers in the U.S Include All Taxes and Fees in the Advertised Price?

When you’re shopping for a new car, be aware that the advertised price is often lower than the actual price you’ll pay. This is because car dealers in the US typically don’t include all taxes and fees in the advertised price.

There are a few reasons for this:

• Taxes and fees vary from state to state. Sales tax on a new car can range from 0% to 10%, depending on the state. Other fees, such as registration and title fees, also vary by state.
• Dealers want to keep the advertised price as low as possible. Buyers are often drawn to the lowest possible price, so dealers advertise a base price that excludes taxes and fees. This can help to attract customers to the dealership and start the negotiation process.
• Some fees are negotiable. Some of the fees that dealers charge, such as documentation fees and dealer prep fees, are negotiable. Dealers may be willing to waive or reduce these fees in order to make a sale.
• Dealers want to make a profit. Dealers make money on the sale of cars, but they also make money on the financing and add-on products that they sell. By advertising a base price that excludes taxes and fees, dealers can increase their overall profit margin
• Remember that it is a “suggested retail” price and dealers may have some room to wiggle.

What’s included in the MSRP? 

• The base price of the vehicle, which includes the standard features and options that come with the vehicle.
• The cost of any optional features that are added to the vehicle.
• The destination fee, which is the cost of shipping the vehicle from the factory to the dealership.

The MSRP does NOT include the following:

• Sales tax
• Registration fees
• Dealer prep fees
• Documentation fees
• Any other add-ons that the dealer may offer, such as extended warranties or service contracts.

What is OUT THE DOOR PRICING? 

This is the price you pay with everything included.  In some countries, the advertised price of a car is the total price you will pay, including all taxes and fees. This makes it easier to compare prices and to budget for your new car. A car’s out-the-door price may include some or all of the following expenses:

• Vehicle title and registration fees
• Destination fees
• Documentation fees
• Sales taxes

There are a few reasons for this:

• Transparency: You know exactly how you will pay for a car, including all taxes and fees. .
• Fairness: All consumers pay the same price for a car, regardless of where they live or where they buy it. 
• Easier to compare prices
• Simplicity: It is easier for car dealers to advertise and sell cars when the price includes all taxes and fees.
• Some countries are required by law.

WAIT- there could be Even More Fees?

Some states currently charge extra for registration fees for electric vehicles (EVs). In fact, 32 states and the District of Columbia impose additional fees on EVs. The amount of the fee varies from state to state, but it is typically between $50 and $200 per year. This fee is offset the lost revenue from gas taxes that EV owners do not pay.

Here’s an estimated example: If you bought a $36,000 MSRP EV in Florida, you are legally obligated to pay these fees at the time of purchase:

• Florida sales tax (6%): $2160
• Florida destination fee: $995
• Florida tag fees: $200

       Total: $3355
Additional Fee on top of MSRP  (Florida currently has no additional registration fee, but they are trying).

What Can You Do If you’re buying a new car:

• Be aware of all of the taxes and fees that will be charged. 
• Ask the dealer for a written breakdown of all of the fees before you sign an agreement.
• Be prepared to negotiate the price of the car. Fees such as documentation fees and dealer prep fees, are negotiable. 
• Dealers may be willing to waive or reduce these fees in order to make a sale. 
• Don’t feel pressured to buy a car on the spot. Take your time and compare offers from different dealerships.
• Lastly, find out if any of the Clean Energy Tax Credits would apply to your purchase. This could help offset some of the additional fees beyond MSRP.

Go electric ✌️

If you’re financing, this tool helps to give you a better idea of how much this purchase will set you back “Out The Door” – beyond the MSRP:
Auto loan calculator: https://www.edmunds.com/calculators/simplified-pricing.html