Tuesday, May 22, 2018
Business

Understanding the mysterious destination fee

What's a destination charge, and why do you have to pay it? The charge isn't usually part of the advertised price, but it can add several hundred dollars or more when you buy a new car or truck.

It covers the cost of shipping the vehicle from the plant and what the dealership did to get it ready for you. Depending on the manufacturer, that can range from a wash and mechanical inspection to hand-detailing and a demonstration of features.

"The destination fee is set by the manufacturer," said Forrest McConnell, chairman of the National Auto Dealers Association and owner of McConnell Honda and Acura in Montgomery, Ala. "There's no markup for the dealer."

That makes it the one part of a car's price that's not negotiable.

Destination charges vary from one company to another, and from one vehicle to another within an automaker's lineup. For instance, edmunds.com says Ford charges $825 for a Fiesta subcompact and $1,195 for an F-150 pickup. Destination charges for imported vehicles are generally in the same range as domestics, despite having traveled farther. The charges on a Japanese-made Honda Fit and German-made BMW 320i are $790 and $925, respectively.

Federal law says the destination charge for a vehicle can't vary from one part of the country to another. Whether you buy a Cadillac ATS a mile from the assembly plant in Lansing, Mich., or 2,200 miles away in Beverly Hills, Calif., the fee remains $925.

That's because buyers from around the country used to flock to Detroit to see their car built and buy it for hundreds of dollars less than at their neighborhood dealership, automotive journalist and historian Mike Davis said. Local dealers objected, so Congress mandated uniform fees.

"Everybody pays the same destination charge for a given vehicle," cars.com chief analyst Jesse Toprak said. "For the consumer, there's no point wasting time trying to negotiate it. Even if you don't like it, you have to let it go. It's like death and taxes."

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