- Used-car dealerships often charge hidden fees that can add hundreds, if not thousands of dollars, to a used car's final price, an analysis of car sales finds.
- Around 7 out of 10 of used-car sales have hidden fees.
- One way to avoid hidden fees is getting the out-the-door price in advance and holding dealers to it.
Car shoppers should be wary of hidden fees at used-car dealerships.
There are around $11.8 billion of hidden fees on 26 million used cars sold every year, according to an analysis by used-car app CoPilot, which reviewed used-car transactions.
The hidden fees are very common, with around 71% of used car buyers encountering them among U.S. brands.
"We’re hearing from customers that bait-and-switch pricing has ramped up considerably in the past few weeks as car shoppers, anticipating tariffs, have rushed to buy before prices increase even more," Pat Ryan, CEO of CoPilot, told ConsumerAffairs. "In this environment, dealers have a lot of leverage in their interactions with car shoppers, and have felt even more empowered to lean into bait-and-switch pricing."
CoPilot said there are three kinds of hidden fees:
- Legitimate fees: Reasonable charges that cover actual costs or services.
- Excessive fees: Charges that are unreasonably high or unnecessary for vehicle add-ons or features.
- Illegitimate fees: Charges that violate laws or are deceptive for services that weren't clearly communicated or added onto the final purchase without consent.
It is the excessive and illegitimate fees that car shoppers should be on the lookout for.
For instance, an illegitimate fee could be for etching on wheels or wheel locks to prevent theft, a fee that costs $1,795 on average.
And an excessive fee could be for a license registration, which costs $293 on average.
Domestic cars were more likely to have hidden fees, accounting for 71% of sales, versus 64% among foreign brands.
CoPilot said used-car prices now average $27,156, up 22% from March 2020.
"Today, more than ever, the dealer business model is incentivized to engage in non-transparent and at times deceptive pricing practices, resulting in hundreds and sometimes thousands of dollars extra added onto car purchases each year," CoPilot said.
How to avoid hidden fees at used-car dealerships
CoPilot said there are a few ways to avoid hidden fees from used-car dealerships:
- Get out-the-door pricing: Contact the dealer in advance to get the final price in advance, which holds them accountable to a number and lowers the dealer’s ability to use bait-and-switch pricing.
- Look for fees that are higher than average or seem unnecessary: Follow up with the dealer if there are any fees you need more clarification on and try to negotiate any fees down that you feel uncomfortable about.
- Research average fees in your state: This way you can easily identify if what the dealer is charging you is in line with what other dealers are charging.
"If you go to the dealer without a straight answer on price, you will lose your leverage in the negotiation process," Ryan said. "When you see an itemized breakdown of charges, you should push back on any charges that seem unnecessary or higher than average."
And there is no federal law specifically outlawing deceptive fees at used-car dealerships.
The Federal Trade Commission had created a rule, called the FTC's Combating Auto Retail Scams (CARS) Rule, that was set to take effect in 2024 but was overturned following legal challenges.
The rule would've required dealerships to transparently communicate vehicle pricing and limited add ons and hidden fees.
Still, some states such as California, Massachusetts and New York require clear itemization and disclosure of fees, Ryan said.
"Nonetheless, many dealers have been able to find workarounds to circumvent the loopholes that exist in more piecemeal state-by-state legislation," he said.