Why Do You Have to Pay a Destination Charge When You Buy a New Car?

Mon, 9/25/2017 - 7:22 pm by Kirsten Rincon

Car Transporter

Destination charges go by many different names: delivery fee, transportation fee, destination freight charge, destination and delivery, and so on. Regardless of the name, you’ll have to pay this added amount when you buy a new car — the fees are both mandatory and on the rise.

What’s the Purpose of This Fee?

This charge covers the transportation of the vehicle from the manufacturer to the dealership you are buying it from. Sure, the vehicle is usually already there when you arrive, but it had to be delivered regardless. According to the Kelley Blue Book site, it’s government mandated that the dealer must itemize this charge separately and cannot work it into the sticker price how many other fees are now.

Gone are the days when you could drive up to the factory and pickup your car. Even if you live 5 miles from the Detroit factory that makes your new GM, Ford, or Chrysler, you’ll still pay for the cost of delivery. Transportation charges are added in and averaged out for cars regardless of their final delivery destination.

If you are wondering about the cost of buying a domestic versus imported model, you are not going to save any money on destination charges by buying an American car. TrueCar.com lists the most current information on the actual fees, and there’s very little difference between American brands and import models. For example, Chevrolet models carry a fee between $720 and $995, while Japanese made Hondas come with a range of $770 to $810.

Rising Fees Add to the Cost of Buying a Car

Destination and delivery charges have risen at a fast pace over the last ten years. A graph from Cars.com illustrates the rising costs of destination fees. This chart shows a 3.3% yearly increase in these charges from 2003 to 2012 — once averaging $643 and now hovering around $879. To put it into perspective, at this rate, you can expect to be paying $1,000 or more by the year 2017.

As the referenced chart also highlights, the average MSRP associated with new cars has also skyrocketed — meaning, the cost of the destination fees seems to be correlated with the sticker price of the car you’re buying. That’s not to say that these fees are being abused by gougers at dealerships — dealers aren’t making a profit from the rise, it’s the increase in cost associated with logistics and shipping that’s driving up prices.

AAA also notes that owning a car is more expensive now than it’s ever been. With all these rising cost factors in play, it’s somewhat of a mystery as to how the new car industry is so strong currently.

If charges like destinations fees continue to increase, one can’t help but to wonder if this will keep buyers away from the dealership, and instead buying used or choosing to hang onto their current vehicle for longer.