When It Comes to Your Car Contract, the Devil Is in the Details

Avoid bogus fees and additional charges in your car contract by reading carefully before you sign.
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Written by Philip Reed
Auto Loans Specialist
Profile photo of Dawnielle Robinson-Walker
Assistant assigning editor at large
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As dealers try to boost profits on each car they sell — because current demand far outweighs supply — many are padding contracts with extra fees and products without telling the buyer. This means it’s more important than ever to carefully review the sales contract before you sign it.

“We are seeing a record level of fees across the board,” says Jesse Toprak, chief analyst for Autonomy, an electric car subscription service. In fact, while buying a car for his wife, Toprak, a former auto finance manager, discovered the dealer had added a $1,995 “dealer prep fee” to his contract.

Catching such hidden extras — and even honest mistakes — before you sign the sales contract is key because once it's signed, you're legally bound to the terms. There are no easy after-the-fact remedies if you see that the purchase price, interest rate, trade-in value and extras are not what you assumed.

Pay attention to the details

“For the average person a car contract is very confusing,” says Oren Weintraub, president of car-buying concierge service Authority Auto in Tarzana, California. When he reviews contracts for his clients, he finds problems and mistakes about 30% of the time.

Weintraub says some mistakes are unintentional. For example, a car’s vehicle identification number, or VIN, is 17 digits long. A dealer could accidentally switch VINs because there are two of the same color cars on the lot.

An innocent mistake? Maybe. But if you get the one car that doesn't have all the bells and whistles listed according to the VIN, you’ve lost out.

Watch out for other common mistakes, like misspelling your name, listing the wrong address, or including the incorrect number of miles allotted in your lease. While these errors can be corrected, they can also cause unnecessary stress.

Then there are what Weintraub calls “sleight of hand” mistakes, which — not surprisingly — are usually in the dealer’s favor. These mistakes can range from listing the wrong residual value on a leased car to drastically inflating the documentation fee, which is simply the cost of filling out the paperwork. This fee can be as high as $900 in states like Florida, and is pure profit for the dealership.

Know what fees are legit

To prevent such “mistakes'' when you’re buying a car, it's best to know what fees are legitimate and all the other costs ahead of time. As Toprak points out, “You don’t want any unpleasant surprises at the dealership.”

Normally, when you buy a car, you pay for four basic things:

  • The agreed-upon sales price of the car.

  • Registration cost charged by the state.

  • A documentation fee.

But if you finance through the dealership, and have a trade-in, the deal becomes more complicated. And instead of a dozen forms in a simple purchase deal, you could be signing nearly 20 different documents, Toprak says.

The sales contract has many different boxes with items that can be added. And that’s where things get confusing. A dealer can add extra fees and give them an official sounding name such as “dealer prep” or “market adjustment.”

Do your research

In today’s tight car market, consumers have little leverage, Toprak says. So you probably won’t be able to get such additional fees removed. Instead, find which dealership has the least amount of these inflated charges.

To do this, email price quote requests for the car you want to different local dealerships. Once you get a quote, ask the dealer to send you an out-the-door price with a breakdown of all fees. (You can request a copy of the contract itself, but few dealers are willing to do that, Toprak says.)

If there are outrageous fees or additions in this breakdown, ask to have them removed. In all likelihood, the dealer will refuse. So you can either pay the fees or shop for a better deal at another car lot.

Here are some additional tips to help you make the cleanest deal possible:

Don’t let yourself be pressured. If you're dealing with a salesperson who intimidates you, ask the manager to work with another person or go to a different dealership.

Take your time. Finalizing the deal can take several hours, particularly on the weekends. Instead, try to sign papers midweek or early in the day.

Compare numbers. Make sure you print the emailed breakdown of costs. Verify that the numbers in the contract match what you were told ahead of time.

Just say no. The finance manager will probably try to sell extras such as an extended warranty. A simple way to decline is just to say you aren’t planning to keep the car past the expiration of the bumper-to-bumper warranty.

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