What Are Destination Charges?(USA)

By KBB Editors 02/03/2021 12:00pm

Have you ever wondered what the destination charge is when buying a new car? Many also wonder if you should pay destination fees or if you can negotiate freight charges at all.

No matter what dealers call it — whether delivery, freight fees, or destination charges — the paperwork typically lists them among others, including taxes, license, and registration.

Where Destination Fees Come From

Well, if you’ve seen the trucks carrying cars on the highways or freight trains stacked with new vehicles, you are basically witnessing the service your destination fees pay. Destination fees range from about $900 to $2,000 per vehicle. Destination fees are not negotiable. No amount of bargaining makes them go away.

Logic would tell you that if you lived near a port or a particular automotive assembly plant, you could potentially pay less for the destination fees. But that’s not so.

Manufacturers calculate the destination charges. They base it on something called an “equalized delivery.” In other words, manufacturers factor the cost of shipping all vehicles on the line. They equalize the cost, so the fee is equal for all car buyers.

That’s why destination charges can’t be waived.

Car Sticker Price Fees Explained

The destination fee should be regarded as another cost of new car business.

Manufacturers must bake several other fees into the price of their new cars and trucks.

GMC and Chevrolet make destination charges transparent for all their vehicle models, according to the manufacturers’ websites. For example, destination fees for a 2021 Chevy Malibu cost $925. A 2021 GMC Sierra 2500 HD Denali destination charge comes to $1,695.

Destination fees must be itemized and clearly listed on the “Monroney” label, or window sticker of each new vehicle. The United States government requires it. That’s because carmakers base destination fees on direct costs. These costs are above and beyond the overhead companies must incur in bringing a product to market.

However, freight is not included in the MSRP, or the manufacturer’s suggested retail price of the vehicle. However, tax, registration, and a detailed list of all the standard and manufacturer-installed options and their retail prices must also be clearly listed on window stickers.

In truth, most manufacturers use the same pool of U.S. freight carriers. Each competes for the transport business with the professionalism and care the manufacturers demand.

With this in mind, the fact that the fees are comparable isn’t too much of a surprise. Of course, luxury-type vehicles must be handled with even greater care and, in some cases, transported in covered trucks.

American vs. Import Fees

Many people mistakenly believe that the destination fee includes the transport of imported vehicles from their assembly plants overseas. This is not the case. The destination fee listed on a new car’s sticker represents only freight charges within the U.S.

So, who pays for the international shipping? Well, you do. That cost gets factored into the U.S. pricing on individual models by the American headquarters of each import manufacturer. For example, let’s say it costs between $750 to $1,100 per vehicle to ship a Mercedes E-Class from Germany to a U.S. port. Mercedes-Benz USA, Inc., which is responsible for pricing in the U.S., must factor the cost into the MSRP of the vehicle.

This is an interesting fact to consider when you think about how imported vehicles are sometimes very price-competitive with American-made vehicles. In fact, imported cars face a pricing disadvantage right from the start.

Can You Eliminate the Destination Charge?

Historically speaking, there was a time when you could travel to Detroit and pick up your vehicle directly from the manufacturer. It eliminated the destination charge. This ended over 30 years ago when the automotive industry adopted equalized freight charges.

Still, some import manufacturers are very creative with their shipping programs. Mercedes-Benz, Volvo, and Porsche offer “European Delivery” programs, each with unique advantages when you travel to Europe to take ownership of your new vehicle.

Programs save customers up to 10% of the total cost of vehicles. They often include time for vacationing. The perk includes things such as insurance while you drive your vehicle in Europe. Most times, all registration, customs, U.S. port processing, and handling fees get included in the discounted price. The savings can pay for your trip.

For example, Volvo offers a European delivery experience with a hotel stay. BMW used to offer a program but ended it in 2020.

So, whether it’s called destination, delivery, transportation, or freight, this additional fee makes it possible to get the vehicle of your choice to your local dealership just in time for you to deliver it to your garage.