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The Anatomy of a New-Car Price

What’s the price of that new car? That should be a simple question, right?

The reality is that you’ll never find the total price of a new car posted anywhere—not on the dealer’s site or on any new-car shopping site. You may find the invoice data and certainly the Manufacturer’s Suggested Retail Price (MSRP). But the first thing to know about the total price of a new car is that the published price is just part of the total price.

The total price for a new car is often referred to as out-the-door, or bottom-line, pricing and consists of the following elements:

  • Base price
  • Options
  • Destination charge
  • Regional advertising fees
  • Dealer add-ons
  • Documentation fees
  • Other local fees
  • Title/Registration fees
  • State sales tax

Base Price

The base price of a new car is the portion of the price associated with the model trim you selected. For example, the 2013 Nissan Altima comes in seven trims: the 2.5, 2.5 S, 2.5 SV, 2.5 SL, 3.5 S, 3.5 SV, and 3.5 SL. Each offers varying degrees of features and performance and is priced accordingly.


Each model trim offers optional features that can be included for an additional price. These features are often organized into packages that can be purchased in combinations as specified by the manufacturer. When researching a specific model, the manufacturer’s website is a great place to find the standard option offerings.

Consider the Convenience Package for the 2013 Nissan Altima 2.5 SV. It consists of a moonroof, folding mirrors, roof lamp, fog lights, illuminated vanity mirrors, auto-dimming rearview mirror, one-touch passenger-side front window, Homelink universal transceiver, and side cargo net. These features can only be purchased as part of the Convenience Package.

Destination Charge

The destination charge covers the cost of shipping a new car to the dealer and is included by the manufacturer.

Regional Advertising Fees

The manufacture passes on the cost of regional marketing campaigns to each dealer. This really is just the cost of doing business, but dealers often pass this cost on to new-car buyers.

Dealer Add-ons

This element of the new-car price is entirely optional. However, it is also the most profitable for the dealer—often with profit margins of 100 percent or more. Dealer add-ons include items such as extended service contracts (often called extended warranties), pre-paid maintenance, and wheel/tire protection.

Documentation Fee

The documentation fee is the price the dealer charges you for the administration costs of selling you a new car. In reality, it is largely profit. Documentation fees vary widely from dealer to dealer and state to state. However, some states regulate the maximum charge. For example, Michigan has set a maximum fee of $200 for 2013 and 2014.

Other Local Fees

Some states require dealers to charge additional fees. The State of California mandates a new-tire fee of $1.75 per tire. This equates to adding an additional fee—$8.75—to the price of a new car (five new tires).

Title/Registration Fees

Every state requires that the new-car buyer transfer the title of the car and register with the state department of vehicles. The transaction is usually handled by the dealer, and the fees are included in the price. These fees are determined in various ways from state to state—some by the value of the car and others by the weight. Your state DMV will usually provide estimates of these fees.

State Sales Tax

State sales tax varies widely from state to state. It can even vary from county to county and city to city within a state. For example, Oregon has no state sales tax, whereas the combined state and local tax in Los Angeles, California, is 9.0 percent.

Some states, like Washington, allow you to deduct the value of a trade-in from the amount taxed if done in one transaction at the dealership. For example, a $30,000 car with a $4,000 trade-in results in calculating sales tax based on a $26,000 sale. Other states, such as California, require sales tax on the full sale price of $30,000.

Stay Focused on the Bottom Line

Whenever you request a price quote from a dealer, make sure it’s a bottom-line, or out-the-door, price that includes every element. Specific element costs may vary from dealer to dealer, but if you obtain out-the-door pricing, you can stay focused on the most important number—the bottom-line price.

In the coming days and weeks, I’ll discuss these elements in more detail, along with strategies for applying your buying power to obtain your best out-the-door price. See you here!

Photo: bigstockphoto.com