Interest charge

What is a destination charge? And do you have to pay them?

This is part of our car buyer’s glossary series which details all the terms you need to know whether you’re buying a new or used car from a dealership.

Looking at the breakdown by item of what it actually costs to buy a car can sometimes be stressful. The cars are already expensive, and then there are hundreds of dollars in individual fees added. Let’s cover one that seems oddly simple: destination charges.

What does the destination fee cover?

Also known as destination charges, destination charges theoretically cover the cost of getting a car from the factory to the dealership. This is usually a flat rate, which does not vary by region. That’s “equalized,” meaning the average cost of shipping cars across the country. If your dealership is right next to the factory that built the car, too bad – you have to pay too, so people a few thousand miles away don’t have huge fees.

Are destination charges regulated by the government?

How destination charges are calculated (that equalization thing mentioned above) is government mandated, as is the need to make it a line item on the Monroney sheet – that window sticker with the MSRP and all other option fees broken down.

Do cars transported from afar have higher destination charges?

Logically, one would think so, but it is not. American-built Ram trucks can have destination charges approaching $1,700, while a German-built BMW costs just $994. While there are a myriad of reasons for this, in short, the destination charge only covers the point the car entered the United States, so international freight charges are simply rolled into the cost of the vehicle itself, which is subject to market forces.

Can you negotiate destination charges?

You can not. It’s a fixed cost, which is why Autoblog and a few other automotive publications add destination charges to all new car prices. You have to pay for it, so why keep it separate? There are many other things to negotiate, such as documentation costs. But this fixed cost, which is the same for anyone purchasing the same vehicle anywhere in the country, is non-negotiable.

Are destination charges getting more expensive?

For the most part, yes. As we documented in May 2021, destination fees have skyrocketed in recent years. Although destination charge calculations are technically regulated by the government, it is unclear what factors contribute to each manufacturer’s calculations. It’s hard not to look at these increases with a skeptical eye when some auto companies are increasing their destination fees while others are keeping them flat or growing by a considerably smaller margin.

What about other charges described as freight or delivery charges?

Here’s the wrinkle: sometimes there’s another delivery type charge added afterwards, in addition to the standard destination charge. It’s a kind of underhanded maneuver that unscrupulous dealers might try to slip into. Basically, it’s an extra and unnecessary burden. The dealer may try to tell you it’s the cost of getting the vehicle to that specific lot, being particularly far from the factory, or something – but since you now know the “equalized” destination charge, you can tell the dealership you only pay the charges shown on the window sticker. End of the story.

So, to sum it up: you have to pay destination tax when you buy a new car, but you don’t have to pay it twice. Be sure to request that any individual charges the dealership asks you to pay are itemized to your satisfaction, and watch out for duplicate charges with slightly different names. This practice is not common, but it is better to be safe than to pay a few hundred dollars that you do not need.