Used and new car prices are climbing through the roof, and the rapidly increasing “destination charge” could be the culprit. The increase in destination charges, also known as “shipping” or “freight” charges has increased so rapidly that three class action lawsuits are currently being litigated.
Destination Charge Increases
Here’s how much major automakers have increased their destination charges since 2017.
|2021 Model year avg.||Change from 2017 model year|
What is a destination charge?
The destination charge, also sometimes portrayed online as a shipping fee, are hidden from online advertised prices, however every buyer pays for them. Heck, even the dealership where you buy the car pays a destination fee, they simply pass that along to the end buyer.
The destination charge is a line item on the manufacturer’s invoice for a vehicle. It is a fee that the automaker sets. There is a retail price for it, and a wholesale price for it. The dealer pays a wholesale price, the consumer pays a retail price. In many cases the price is actually the same.
Destination charges are set by the manufacturer and are non-negotiable, since they are part of the vehicle’s MSRP. The manufacturer’s suggested retail price is non-negotiable (it is set by the manufacturer), however you can (and should!) negotiate your total out-the-door price (which includes a hopefully discounted selling price).
It is well known in the automotive industry that manufactures make a profit on their destination charges. Currently there are 3 active class action lawsuits against GM, Ford, and Stellantis for “deceptive” delivery fees.
From the GM lawsuit:
The lawsuit, filed in the Southern District of California, involves two plaintiffs who allege they were not aware that GM made a profit off of the destination fees it charges customers. According to Car Complaints, the plaintiffs are California resident Robert Romoff, who recently purchased a new 2021 Chevrolet Equinox with a $1,195 destination charge, and New Jersey resident Joe Siciliano, who purchased a new 2019 Cadillac Escalade with a $995 destination charge.
Who has increased their destination charge the most?
Stellantis, formerly Fiat Chrysler has increased their destination charges the most. Consumer Reports found Stellantis’ destination charges increased an average of 90 percent for Chrysler, Dodge and Jeep from 2011 to 2020, and 74 percent for Ram over the same period. And, even though no one buys them, Stellantis increased Fiat’s destination charge by 114 percent since 2012.
Surprising to many is the fact that domestically produced vehicles are also getting hit with VERY high destination charges. Take for example the new Jeep Grand Wagoneer which is built in Michigan. It comes with a $2,000+ destination charge.
What’s frustrating about the increase in destination fees is that it is yet another “black box” in the car buying process. Not only do we (consumers) have to deal with BS and bogus fees from the dealership, we also have to simply “accept” theses hidden profit fees from the manufacturers.