In a NutshellYour new car’s final price is known as its out-the-door price. This price can be significantly higher than the cost shown on its window sticker, because it generally includes expenses such as sales taxes, dealer charges, and registration and title fees. Understanding these additional costs can help you negotiate the best deal on your new car and stay within your car-buying budget.
With a new-car purchase, sometimes even a small difference in the price you pay can have a big effect on your finances. That’s why it’s important to know a car’s final out-the-door price before you buy.
You may be surprised to learn that the price on a car’s window sticker — the manufacturer’s suggested retail price, or MSRP — likely isn’t the actual price you’ll pay before driving your new car off the lot. That’s because the MSRP doesn’t reflect expenses like sales taxes and registration, title and dealer fees, like the out-the-door price does.
Once these additional costs are included, a car’s out-the-door price might cost thousands of dollars more than its MSRP.
Let’s take a look at the expenses that can contribute to your car’s out-the-door price and how they can affect the price you pay. We’ll also share ways you can help make sure a car’s out-the-door price fits within your budget.
- What’s included in the out-the-door price?
- MSRP vs. out-the-door price: A real-world example
- Protect your budget by planning ahead
What’s included in the out-the-door price?
A new car’s out-the-door price may include some or all of the following expenses.
- Vehicle title and registration fees
- Destination fees
- Documentation fees
- Sales taxes
Vehicle title and registration fees
Your car must be titled and registered with your state’s department of motor vehicles or transportation agency. The fees associated with this vary from state to state.
In many states, there’s a flat, one-time fee charged for the vehicle title. Title fees can range in cost from $4 (Arizona) to more than $250 (Iowa).
When it comes to vehicle registration, states base their fees on a number of factors. Some states charge a flat fee while others base the fee on the total weight of the vehicle, with the heaviest vehicles costing the most to register. In certain states, registration fees are calculated based on other factors, like the age of the car or its fuel efficiency. Registration fees are usually annual or biennial, and can range from as little as $14 (Mississippi) to more than $200 (Florida).
AAA features a list of registration and title fees by state. Be sure to confirm these rates with your state’s department of motor vehicles.
The destination fee covers the cost of transporting the vehicle from the factory to the dealership. It’s charged by the automaker, not the dealer, and passed on to you.
This fee is listed on the car’s window sticker, but it’s not included in the MSRP. It’s shown afterward, as a separate expense that contributes to the vehicle’s total price. When carmakers advertise the price of a vehicle, the price listed typically doesn’t include destination fees.
These fees vary by automaker and vehicle type, and they generally run from about $1,000 to $1,400 or more.
The documentation fee, also referred to as the doc fee, is charged by the car dealership to cover the cost of handling the paperwork associated with the sale of the vehicle.
Some states place a cap on the amount a dealer can charge for doc fees, which can range from a cap of $75 to $300. But in states that don’t limit doc fees, the cost might be higher.
There are two types of sales taxes that you may have to pay when buying a new car: statewide and local. Whereas statewide sales taxes are just that, local sales taxes are sales taxes charged by some cities and counties in 38 states.
Currently, 45 states and the District of Columbia charge statewide sales taxes. Alaska, Delaware, Montana, New Hampshire and Oregon don’t have sales taxes.
Statewide sales taxes can climb as high as 7.25% (California), while local sales tax rates can be as high as 5.14% (Alabama).
MSRP vs. out-the-door price: A real-world example
The difference between a car’s MSRP and out-the-door price can be significant.
Let’s say you live in Louisiana, and you’re purchasing a new 2019 Toyota Corolla. Here’s a breakdown of the costs that add up to the out-the-door price.
State and local sales taxes
$1,855 (at 9.45%)
$27 (0.1% of the vehicle’s value plus an $8 handling fee)
Total out-the-door price
In this example, the out-the-door price of the Corolla is approximately $21,780.50. That represents a $3,080.50, or roughly 16.5%, increase over the car’s MSRP.
Protect your budget by planning ahead
It’s important to keep your car’s out-the-door price in mind both prior to and during the negotiation process. This will help you make sure the price you’re paying for your new car fits your budget. Here are some tips.
Estimate out-the-door price by using online tools
If you’re financing your purchase, the difference between a car’s MSRP and out-the-door price could impact your monthly payment. Edmunds offers an auto loan calculator that estimates sales taxes and registration fees. And NADA Guides lists destination fees in its pricing breakdown when you search by make and model. These tools can help give you a sense of what your car’s out-the-door price might look like, long before you close the deal.
Negotiate using out-the-door price, not monthly payment
If you’re financing your car purchase at the car dealership and negotiating based on the monthly car loan payment, the salesperson may be able to play with the numbers in ways that reduce the amount you’ll pay each month while increasing the total cost of your loan.
For example, the salesperson may be able to reduce your monthly payment by extending the loan term. But the longer loan term could mean you pay more in interest over the course of the loan.
The best approach is to focus on the out-the-door price during negotiations. This can help you make sure that you don’t wind up paying more than you can afford.
Apply for preapproval for a car loan
If you apply for and get preapproved for a car loan, the lender tells you the maximum amount you might be able to borrow. Unless you plan to make a car down payment, this means you’ll need to keep an eye on the vehicle’s out-the-door price and make sure it doesn’t exceed your preapproved loan amount.
And since getting preapproved by multiple lenders allows you to shop around for the best interest rate, going this route may have the added benefit of reducing the interest you pay on your car loan. But remember: Preapproval isn’t a guarantee. You’ll need to officially apply to pin down the terms you can count on.
A car’s out-the-door price can exceed its MSRP by thousands of dollars. Ask your salesperson outright for the out-the-door price before deciding. If you don’t think in terms of the out-the-door price — versus your monthly payment — when buying a new car, you might end up committing to much more than your budget allows.
When setting your budget, make sure you consider additional expenses that come with owning a car so that you don’t find yourself struggling to make car payments down the road.
Calculate your sales tax
Use our sales tax calculator to find out the sales tax rate in your area and how much sales tax adds to the price of something you buy.