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Closing fees: Fair and foul

What's unavoidable and what's not

Last updated: February 2014

Fee What it's about
Unavoidable
Documentation fee or conveyance charge A charge of $150-$300 for processing documents that establish your title and registration is reasonable. Question any charges that are higher than $300.
Guaranteed Auto Protection (GAP) insurance A must for leased vehicles. It covers the difference between your payments over the life of the lease and the residual value of the vehicle in case it is stolen or totaled in an accident.
Title and registration Let the dealership handle the formalities of establishing you as the new owner of the vehicle and obtaining temporary tags. Expect the dealer to pass along what the state charges—typically between 1 percent and 3 percent of the vehicle’s cost—plus a documentation fee.
Sales tax Some states calculate tax on the full price of the car, but most figure tax on the difference between the price of the new car and the trade-in, if appropriate.
Destination charge A standard charge that covers shipment of the vehicle. Question any secondary “delivery fee” that’s listed on the contract.
Maybe
Advertising charge Increasingly common, regional dealer cooperatives assess fees to support promotional efforts. If this charge shows up only at the closing, contest it. But you may end up having to pay.
Extended warranty Extra coverage for major repairs that may be needed after the manufacturer’s warranty expires. It’s your call. But if you do buy one, we recommend getting coverage backed by the vehicle manufacturer or an established third-party company. You don’t have to buy on the spot; take your time to compare contracts.
Additional dealer markup Sometimes added to hot-selling models for additional profit. You can contest this, but if the model is in high demand, the dealer may not have any incentive to work with you.
Avoid paying
Dealer preparation fee Most manufacturers pay dealers to remove the coatings and coverings that protect the vehicle during shipment and to clean up the car for you. There is no justification for you to pay the dealer again for this service.
Credit life insurance Your survivors will be able to pay off the vehicle if you die before your payments end. Term life insurance is cheaper, but make sure it’s enough to cover loan payments.
Disability insurance Covers your car payments if you are unable to work because of a disabling accident or extended illness. You may already have disability coverage through your employer; if not, you can purchase it more cheaply elsewhere.
Pinstriping Expensive tape that a detailing shop can put on for you at a lower price than the dealer can.
Rustproofing/undercoating Today’s vehicles are manufactured to withstand corrosive weather and road conditions, so you will not need to pay for additional treatment by the dealership.
VIN etching This is an anti-theft measure in which the vehicle identification number (VIN) is etched into the glass. Some states require that dealers offer it to you, but none require that you buy it. It can be done less expensively elsewhere or even by yourself with a $25 kit.
Fabric protection This is just expensive Scotchgard. Just say no.
Paint sealant It is little more than a vastly overpriced liquid wax you can easily purchase from an auto-supply shop for $10 or less.
Security/anti-theft system An alarm or theft-recovery device can reduce your car insurance premium. But the high price you pay for a dealer-installed system will likely negate any such discount.

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