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Understanding the true cost of a car can be challenging, but the key lies in knowing the out-the-door price, which includes all additional fees and charges. To ensure you have a clear understanding of the total cost, familiarize yourself with the concept of the out-the-door price, and use our free calculator to estimate the final amount.
The out-the-door price is more than just the sticker price—it includes the vehicle’s selling price, taxes, title, registration, doc fees, and any dealer add-ons or accessories. By focusing on this comprehensive price, you can avoid unexpected charges and negotiate better deals with dealerships.
CarEdge is here to help you navigate the car buying process with ease. Check out our free out-the-door price calculator to estimate the true cost of your next vehicle purchase and ensure you’re getting the best deal possible.
Read on to learn more about what all is factored into the OTD price.
The components of an out-the-door price
Imagine you were buying your groceries and when you went to checkout the cashier told you that the strawberries were $4, but that the container they came in was an additional $1, and there was a “grocer fee” for stocking the strawberries of an additional $.25. Your $4 strawberries just became $5.25 strawberries.
If that was reality, you’d probably be pretty frustrated with the grocery store. “Why didn’t they just advertise the price as $5.25, instead of $4.”
Welcome to the world of buying a car! Dealerships for decades have advertised prices for cars that simply aren’t true. The total cost to purchase a vehicle is its out-the-door price, and the components that make up an OTD price are as follows.
Selling price
The selling price of a vehicle is the first piece to our “out-the-door” puzzle. The selling price is the amount both parties (customer and salesperson) have agreed to in order to make a transaction happen.
For example, if you see an SUV online listed for $39,900, and you contact the dealer and negotiate the price to $37,750, that would be your agreed to selling price.
This is not the total out-the-door price.
Taxes
In most states (with the exception of Delaware, Montana, New Hampshire, and Oregon) your purchase will be subject to sales tax. Sales tax is calculated on the zipcode level, because in many locales there are state sales taxes and then also county sales tax. There are also some regions that charge an additional vehicle tax (Arizona, for example).
Every dealership has software that allows them to calculate what the total tax amount will be on your purchase. Ask the dealer for this amount, as it is the second component of our out-the-door price. Even if you are buying a car out of state, you can still have the dealer run your taxes for your home state, most have the software to do that.
Title
If you’re purchasing a car in the United States, and you want to own it legally, you need it to be titled in your name. Each state charges a fee when you request a title. Although it is usually nominal (in most states just a few dollars), it is another charge you need to be aware of to calculate your total out-the-door price.
Keep in mind that our free Out-the-Door Price Estimator will tell you what your state’s title fee is. I recommend referencing that when you review what the dealership shares with you.
Registration
Another fee from your state government is the registration fee, which is a charge to register your vehicle in your name. Registration fees vary greatly from state to state, with some states charging a flat fee, and others basing their charge on the weight, age, or even horsepower that your vehicle produces.
The registration fee typically includes license plates (sometimes referred to as “tags”). There should not be a separate “tag” fee in most states.
Doc fee
A dealer fee that is never disclosed until you ask for the out-the-door price is the documentation fee. This fee is a pure profit center for dealers, but one you’ll be hard pressed to get them to remove.
Doc fees are not mandatory, but all dealers charge them. In many states they are capped. In California, the doc fee is capped at $80, but in Florida, doc fees can be over $1,000. Each dealer sets their own doc fee amount, and it is a major contributor to your total OTD price.
Frustratingly, many dealers add accessories to their inventory and then try and sell those to their customers. If you’ve ever had a dealer tell you “we tinted the windows, so that’ll be $995,” you’ve experienced this.
These may not be included in the price you initially negotiated, but they absolutely will be in the out-the-door price.
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How to use the out-the-door price
Now that you know what makes up the OTD price, it’s important to understand how to effectively use it.
When you negotiate the price on any car deal it is important to ask the dealer for the OTD price. Many dealers will list their lowest price so that they show up on the first page of websites like CarGurus and Autotrader, but then they’ll surprise you with massive doc fees and other accessories.
A dealership that shows up as a “bad deal” on CarGurus might actually have the better OTD price, and for that reason it’s always of the utmost importance that you focus your negotiating efforts on the out-the-door number and nothing else, since the internet price is really BS.
I wish I was kidding, but this is the sad reality of the industry, the price simply isn’t the price.
Buying a car isn’t easy. Finding the right vehicle, negotiating a fair price, sitting through the finance and insurance office … It’s a long, tenuous, and generally uncomfortable journey. The final hurdle you face is signing the vehicle purchase agreement; a confusing and convoluted document that outlines the selling price, fees, taxes, your trade in, and more.
Car dealers sell tens, if not hundreds of cars each month. That means dealers are very familiar with vehicle purchase agreements — they look at them everyday. On the other hand, most car buyers only purchase a vehicle once every few years (at most). Who do you think has a better understanding of the contract? The dealer or the customer?
The answer is obvious.
That being said, you shouldn’t blindly sign off on your vehicle purchase agreement. Instead, we highly recommend you watch the video embedded on this page or read through the remainder of this written guide.
For many, purchasing a vehicle is the second largest transaction of their life. With that in mind, it’s important that you have a thorough understanding of what you are signing for. You need to be prepared to sniff out any “hidden” fees or unexpected “extras” the dealer may be adding to your purchase.
Without further adieu, let’s dive in.
If you’re financing your purchase
The first thing you will see on your new car purchase contract will be information required by the federal Truth-in-Lending Act – or “TILA” for short. This information will not be present on your contract if you are not financing your purchase.
There are four key pieces of information that must be included in the Truth-in-Lending Disclosure:
Annual Percentage Rate: the APR is the cost of credit expressed as a yearly rate in a percentage;
Finance Charge: cost of credit expressed as a dollar amount (this is the total amount of interest and certain fees you will pay over the life of the loan if you make every payment when due);
Amount Financed: the dollar amount of credit provided to you (this is normally the amount you are borrowing);
Total of Payments: the sum of all the payments that you will have made at the end of the loan (this includes repayment of the principal amount of the loan plus all of the finance charges)
By law the dealership must review each of these four components of your purchase with you. Savvy finance managers will circle the boxes on the contract with the back of their pen so that it leaves a mark on the carbon copy of the contract as “proof” that they reviewed the document with the client.
Below this you will find details about your payment schedule. At this stage in the process, nothing should be foreign here; this should show the agreed-to loan financing option you selected.
Below that, you’ll notice a few disclaimers. One of importance is the prepayment notice. If you pay off your loan early you will not be subject to any penalty. Always keep this in mind when you are financing a vehicle purchase.
Itemized purchase components
Next comes a list of all components of the contract broken out in an itemized fashion. This section of the contract is intended to make it clear to you what you are purchasing and how much you are financing to make the purchase. For many people this section of the contract gets confusing, but it doesn’t have to be. Let’s break it down line by line. Feel free to refer back to this page when you’re reviewing your own contract in the future.
Cash price
The first item you see in the itemized section of the contract is the cash price, also referred to as the selling price of the vehicle. This amount, plus the doc fee total the entire cash price or selling price of your purchase.
Down payment
The down payment section refers to any money you put down on the purchase. If you are trading in a vehicle this will include (like the example above does) a trade in allowance, payoff, and net trade in. If you owe more than your current car is worth, you will see a negative value on line 2C. If you were to put cash down for your purchase that would show on line D, and if you have any incentives or rebates that go towards your down payment those would show on line E.
Unpaid balance of cash price
This is simply the cash price minus the down payment amount.
Paid to others on your behalf
As it sounds, this section refers to any fees being paid to other parties on your behalf. In the example above you see “N/A” everywhere. That means the customer did not roll their taxes, title, and registration into the loan for their purchase. Instead, they paid those fees out of pocket when they went to register the car in their name. This section will typically be full of numbers that vary from state to state (since each state has different sales tax, title fees, and registration fees). If specific insurance coverages were purchased (which very few people purchase nowadays), and they were rolled into your loan, you would see those amounts in lines E, F, and G. The same goes for lines H through P.
Amount financed
The total amount financed is the sum of section 3 and section 4. The unpaid cash balance, plus the amount paid to others on your behalf.
The actual vehicle purchase agreement
Believe it or not, everything we’ve reviewed thus far is actually not the vehicle purchase agreement, it is the retail contract required for finance purchases. If you aren’t financing your vehicle purchase you won’t be reviewing a document like the one above. Instead you’ll see something similar to what we’re about to cover, the real purchase agreement.
The purchase agreement restates everything on the retail contract (just on slightly different parts of the page) and includes a few other important items, two worth calling out specifically:
The buyer’s trade in certification; and
The warranty disclaimer and documentation fee notice.
Buyer’s trade in certification
This section of the vehicle purchase agreement only comes into play if you are trading a vehicle in during your purchase. When you sign the contract you certify that:
The title is not salvaged;
The airbags are intact and in working order;
That the odometer has not been modified; and
That the emissions system has not been modified.
If any of these conditions are not met, or you do not disclose them to the dealer, they can void the transaction. As with all situations, honesty is the best policy, so be sure to tell the truth before signing the dotted line!
Warranty disclaimer and documentary fee notice
The final section to make you aware of on the vehicle purchase agreement is the warranty disclaimer and doc fee notice.
The warranty disclaimer makes it clear that the purchase is being made “as-is,” with no additional warranties (from the dealer). As the disclaimer states, any warranties from the manufacturer are not “party” to the dealer, and you can leverage them anywhere the manufacturer supports, not just the dealership where you are making your purchase.
Then, below that is the documentary fee notice. This states the reason why you see a “doc fee” on the purchase of your vehicle. Doc fees vary from state to state, and as we’ve written about before, you’ll never be able to get a dealer to remove a doc fee from their contract, but you can get them to discount a vehicle the amount of the fee.
The vehicle purchase agreement and retail purchase contract certainly do look intimidating, but that shouldn’t stop you from understanding how to read either of the documents. Our hope is that after reading this guide you will feel more comfortable and in control when you are going over them with the finance manager when completing your purchase. Remember, always ask questions when you’re not sure about something. If there is something that you don’t understand, seek clarification. Never sign a document if you are not 100% sure what you are signing. Don’t worry, you are in control and now you know what to look for.
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The car business has taught me a lot over the 40+ years that I’ve been a part of it. Today I wanted to share with you the five most important things I learned during that time:
1. Be you.
Be who you are — warts and all. It took me a while, but over the years, I figured out that it was important for me to be a little silly, a little off kilter, and a little different at the dealerships I worked at. Why? Because that’s who I am.
I remember many, many years ago, watching a guest on an afternoon talk show say that you should “dare to be different.” I hate to say it, but it’s easy to be pretty much the same, but if you dare to be different, you’ll inevitably stand out from the crowd.
For me, that meant having fun with customers, being both informative, and entertaining at the same time. When I was selling, I was giving the customer a show. Fortunately for them, there was no cover and no two drink minimum, but damnit, they were entitled to a good time.
My motto was simple, “if you give them a good show, they will part with their dough!” (As you can see, I stuck with car sales instead of poetry for good reason). Don’t feel pressured to act a certain way in the dealership, whether you work there, or you’re coming in to buy a car. Not only is it perfectly fine to be you, it’s encouraged. Be the best you, you can be.
2. Tell the truth, the whole truth, and nothing but the truth.
If you find yourself having to tell something other than the truth, you are not only letting your customer down, but more importantly you are letting yourself down! As I have been known to share with a customer, “if the truth is going to preclude us from making a deal, then so be it, I’m not going to lie to you in order to make it happen.”
Jack Nicholson famously shouted from the witness stand in the movie, A Few Good Men, “You want the truth? You can’t handle the truth!” Maybe in the military he was right, but when it comes to sales, he was dead wrong.
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In sales the truth shall set you free. Rather than wondering down a twisting road of lies, each requiring you to remember what the last lie was, you can instead simply tell the truth. As I like to say, “if it is right, do it or say it, if it is wrong, don’t do it or say it, and if you are not sure if it is right or wrong, do both you and your customer a favor, and don’t say it.”
Tell the truth, you’ll both be better off for it.
3. Never tell the customer what you can’t do, always tell them what you can do.
In my 40+ year career in the car business, this one took the longest time for me to understand. You never want to say “no” to a customer, instead, you are always searching for a way to say “yes” to them. One way to do this? Always focus your conversation around what you can do. This puts both you and the customer on the path towards “yes.”
For example, let’s say you’ve quoted a customer a payment of $498 a month for a 60 month loan. Like most customers do, they say, “make it $450 for 48 months and we’ve got a deal.”
For the longest time my response was almost instant and almost always the same, “What are you crazy, I can’t do that,” and the ultimate result was almost always the same: we didn’t make a deal because it was too confrontational.
Later in my career, I handled the same situation very differently. I would tell the customer a story (selling is storytelling), about when I attended company-wide sales training, and they taught us to never tell a customer what we can’t do. “I should only tell you what I can do, and folks if you pay close attention to what I can do, you’ll probably notice that I am really telling you in a nice way, what I can’t do.” This was my go to script.
“So what I can do is $498 a month for 60 months. Can we make this work for both of us?” I’d finally ask.
This wouldn’t always work, but the results were an awful lot better than simply telling the customer, “nope, we can’t do that.”
Always speak to your customer in terms of what can be done. For both of you, it’s a much more fun and positive path to travel.
4. Under promise and over deliver.
This one is as old as the hills but incredibly important, under promise and over deliver. If you tell a customer that you are going to do something, whether it be big or small, do it. I don’t care how small or trivial it is, if you say you’re going to do it, do it. Did you tell a customer that you’d follow up later on today with more information? Call them later that day, even if you haven’t gotten the information yet. If you don’t keep your promise you’ll erode valuable trust with your customer.
I cannot tell you how much that means to a customer, seemingly small things like picking up the phone and giving them a call when you said you would, is truly a difference maker. Trust me, the salesperson down the street probably won’t keep that promise. All you need to do is under promise and over deliver to take the first step towards being their go to “car guy.”
Remember, never promise more than you can deliver. If you do, you’ll instantly become a “typical car guy” in the customer’s eyes. Remember, dare to be different. Part of that difference is always doing more than you said you would. No ifs, ands or buts. If you promise it, do it!
5. When it comes to customers, it is cheaper to keep them than to replace them.
It costs a ton of money to acquire a new customer. Whether your marketing includes digital, TV, radio, direct mail, etc, it’s incredibly expensive to acquire new customers at your dealership.
Dealerships invest in all this marketing to attract customers to their showroom, with the hope that their sales staff can sell them when they come in. If your store is really good, you’ll close 20 to 25% of the people that walk in for the first time. That means 75 to 80% of people aren’t buying on their initial visit.
Would you like to improve your odds of closing a deal? Of course you would. How can you? By concentrating your efforts on your existing customers.
Existing customers will close at a higher rate because they have already done business with you (if you treated them right the first time around). One of the best things your dealership can do is to configure a rewards program that is designed to encourage your customers, both sales and service, to remain your customer.
Perhaps you can guarantee an extra $500 trade value if they have always serviced and maintained their current vehicle at your dealership, whether they purchased it from you or not. Take a cue from your local supermarket or grocery store, they all have rewards programs for shopping with them. Come up with something similar for your dealership.
Research shows that existing customers will pay a higher average gross profit than a fresh customer. Do the math and you’ll realize that it costs a whole lot less to keep your existing customers than it does to go find new ones.
Those are the five most important things that I have learned in my 40+ years in the car business.
A car’s invoice price is the amount that a car dealership pays the manufacturer for a vehicle. By understanding how this price determines the overall sticker price of a vehicle, you can shop smart when hunting for deals. In this guide we’ll show you how to look up the dealer invoice price, no matter the car you’re interested in.
What’s the Dealer Invoice Price? It’s Your Ticket to a Deal.
Did you know that car dealerships don’t own their inventory outright? Floorplanning costs are a little-known facet of the auto industry. At the center of the costs of being in the car business are invoice prices. The dealer invoice price refers to the amount a car dealership pays to the manufacturer for a vehicle. It’s important to know this price because it can serve as a valuable tool in negotiating the final cost of a car. By understanding the dealer invoice price, you can have a better idea of a fair price for the vehicle you’re thinking of buying.
Franchised car dealerships buy their inventory directly from their manufacturers. Similarly to you and I, dealers “floor plan” their purchases. Floor plan is industry jargon for “finance,” and it means that dealerships take out loans to pay for all of the vehicles you see on their lot, just like most consumers do when they finance the purchase of a new vehicle.
Dealerships receive an invoice directly from the factory telling them the price of the car (including the destination fee) that they owe. The dealer invoice is something you’ll want access to when negotiating the price of a new car.
When it comes to used cars, they are primarily bought and sold from the auctions or customer trade-ins, and in these cases looking at a dealer invoice price won’t be an option. You can always ask a dealer what they paid for a used car, but there typically won’t be a willingness to share that information.
On the new car side of things, dealers are much more likely to be open and transparent about the invoice cost they paid to purchase a vehicle. This has become a sales tactic that nearly all car dealerships use to convince customers that they are getting a fair deal.
Looking for something else? Here’s how you can go about finding the dealer invoice price when buying a car…
Ask the Sales Manager for the dealer invoice
At the end of the day, there is only one foolproof way to get the invoice price of any new car — ask the salesperson or sales manager at the dealership. This doesn’t have to be overly complicated. A quick email that says, “Hi, I am interested in this Ram 1500 pickup truck, and I want a fair deal. Can you please send me out-the-door pricing, a copy of the Monroney label, and the invoice you paid from the factory?” Will go a long way.
Referencing the out-the-door price is a great way to show a salesperson or sales manager that you know what you’re talking about, and you don’t want to spend hours discussing monthly payment goals. Asking for the Monroney label, or window sticker is also a great way to show you’re on top of your game. You want to know what options and features the vehicle has, and what better way than to look at the Monroney label? And finally, asking for the factory invoice makes it clear to the dealer that you want to make a fair deal.
The same thing applies to money factors when leasing a car. Do not be afraid to ask a dealer what the money factor is on a lease, and to follow that question up with, “Is this the buy rate, or are you marking it up?” If the dealer can’t give you a straight answer, that’s another sign it’s time to find someone new to work with.
Tips for Negotiating Based on Dealer Invoice Price
Set a target price: Determine a target price based on the dealer invoice price and any applicable incentives or rebates. This will give you a starting point for negotiations.
Preparation is key: Bring printouts of your research, including the dealer invoice price and any incentives or rebates, to the dealership as evidence to support your negotiation. Don’t forget this negotiation cheat sheet!
Stay calm and confident: Negotiating can be stressful, but staying calm and confident during the process can help you secure the best deal possible.
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As billions of people shelter in place, many household brand names are struggling to find their footing. Hertz Rental Car is one of them. With the drastic decline in travel (both business and personal), Hertz is faced with more uncertainty than ever before. As Hertz contemplates filing for bankruptcy, our team at CarEdge is considering what impact that would have on the used car market, and specifically used car prices and deals for consumer.
Should you buy a used car today, or wait a few weeks or months to get a better deal? That’s the money-saving question, and Hertz’ bankruptcy decision will certainly implicate what makes the most sense.
With a total fleet of over 856,800 vehicles globally (as of 2018), it’s safe to say that Hertz has a lot of vehicles under their ownership. What would happen if Hertz has to liquidate those assets to pay back their creditors? In the United States alone, the company has more than 500,000 vehicles under their ownership. If Hertz files for bankruptcy and has to sell all of these used cars, what would happen to used car prices?
Let’s explore.
Used car pricing is demand driven
It’s important to understand that car dealerships base their used car prices off of “market value.” Like I’ve written about in the past when discussing how much dealers mark up their used car inventory, dealerships use software like vAuto to constantly adjust their used car prices to reflect what people are paying for similar cars in their region.
That being said, if there was an influx of used cars that flood the wholesale market, we would anticipate that demand to purchase those cars would not keep up, ultimately lowering the price per vehicle. We’ve already seen a decrease in wholesale prices for used vehicles, with a historic 9.2% drop in whole prices recorded in April, according to data reported by Manheim Auto Auctions, the largest purveyor of used car auctions in the United States.
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Hertz, and their creditors desperately want to avoid having to liquidate their inventory of vehicles, because they know prices are already suppressed. According to Bloomberg, they’re looking for any option other than a “fire sale.”
But what would happen if hundreds of thousands of used cars immediately flooded the market? Because of the sheer scale of their liquidation, it’s not likely that Hertz will be able to liquidate many vehicles directly to consumers. That means car dealers will buy up their inventory at suppressed prices, and in return sell them at lower prices (of course with a margin still built in).
If the supply side of our equation increases by 500,000+ units, and the demand side stays the same, you ultimately have a decrease not only in wholesale prices, but also retail prices. Car dealers will need to sell their inventory to sustain their cash flow, and in theory, good deals should be for the taking. Ultimately a large increase in used car supply will trigger car dealership’s “dynamic pricing” tools to rapidly lower their selling price, while still maintaining some profit margin, at least that’s our supposition.
Is buying a used rental car a good value?
One of the questions I get asked frequently is if buying a rental car is a good value. The answer is, it depends.
With Hertz potentially liquidating hundreds of thousands of cars, I can assure you there are some vehicles they’ll be selling that you’ll want to avoid, and some you’ll certainly want to take a closer look at. How can you tell which rental cars make good used cars? Here’s my advice.
Take into consideration where the car was driven. To find this out you can look at the vehicles CarFax report. Although it won’t tell the full story of what a vehicle has been through, knowing where it spent most of its time is helpful.
For example, very recently we helped a client purchase a used car in Anchorage, Alaska. The vehicle was previously a rental car, and it only had 14,000 miles on it. Why? Because in Alaska they have an incredibly short summer rental season, and this car had been driven hard for three months, and then was ready for sale to a local resident. What did that mean for our client? They got a great car, at a great price, with relatively few miles, in driving conditions that focused entirely on highway roads, not city streets. In this example, buying a rental car is a great used car value.
On the other hand, if you’re looking to buy a rental car and it spent most of its days in a major city center, you may want to think twice. Scratches and dings are almost certainly going to be present. How many potholes can one car drive over before the tires need to be realigned? The brake pads may be worn, etc, etc.
If you do want to buy a rental car as a good used car value, you’ll want to get a pre-purchase inspection completed in advance, to confirm everything is in good working order.
How to buy a used car directly from Hertz
Whether Hertz goes bankrupt or not, you can buy vehicles from them. Hertz Car Sales is a business unit within Hertz that comprises 75 retail store fronts nationwide. Hertz Car Sales would not be able to support the liquidation of all Hertz inventory in the event of bankruptcy, however it is likely they would see an increase in used car sales.
That being said, Hertz Car Sales takes a “one price” approach, which means you will not be able to negotiate the selling price of a vehicle. Time will tell, but you may end up getting a better deal if you buy a car through a dealer instead.
Keep in mind other car rental companies, like Avis, Budget, and Enterprise also offer similar programs which may be worth investigating at this time too.
