Some Car Companies Are Making a Lot More on Destination Fees Than Others: Study
Consumer Reports digs into destination fees to uncover the reasons behind some sizable increases.
When purchasing a vehicle, your bill of sale may include a number of charges on top of the MSRP. Advertising costs, dealer prep, documentation, and market adjustment are common terms for some of those nickels and dimes tacked on to the purchase price. The big one is the destination freight fee; the price varies wildly from manufacturer to manufacturer and model to model. Consumer Reports did a deep dive on this line item, which seems to be increasing year over year.
The study discovered that automakers raised destination fees by thirty percent between 2011 and 2020, which is two and a half times the average inflation rate. A quick look at a few automotive sites showed the results in real time: the destination freight fee for a small EV is $895 for 2020 models and an additional $100 for 2021 models. For a truck, the price increased from $1595 to $1695 for the newest model.
So what’s the deal? The aviation industry has been subsiding on a diet of heavy additional fees like seat selection, baggage, and priority boarding for several years now to shore up revenue. Advertised prices don’t typically reflect the additional fee, which can add up to be a lot for a budget buyer. As that relates to car sales, former manufacturer executive and now independent consultant Dan Bedore told Consumer Reports that destination fees have become another way for automakers to increase revenue.
“It does not take a mathematician to understand the value of a $100 increase to a company that sells two million units a year,” Bedore said.
Fiat Chrysler, now Stellantis, was called out in this study for destination fees that increased for various models, and in particular a 50 percent increase for the Jeep Cherokee between 2016 and 2019. Ford was also cited for sizable destination fees like $1695 for a 2021 Ford F-150, and Chevrolet charges a similar fee for a Silverado. Audi earned recognition for the slowest increase at 10 percent per year, and BMW, Infiniti, Lexus, Lincoln, Mercedes-Benz, and Volvo for increasing by less than 20 percent each.
To be fair, Rebecca Lindland, principal at RebeccaDrives.com says, an auto carrier can only fit so many vehicles, and it can't fit as many trucks and SUVs as cars. With the market skewing heavily toward larger vehicles in the last several years, that drives the cost of freight. Energy prices are also a factor; when the cost per barrel of oil goes up, so will destination fees.
Consumer Reports was not satisfied with automaker explanations for the increases; they say almost no other business expects consumers to pay separately to transport goods from manufacturing facility to retail. Based on its findings, CR is advocating for new rules requiring automakers to include destination charges in advertised prices in print and online. In the meantime, consider researching the destination fee ahead of time, which typically shows up on the manufacturer site as a footnote. Then when you’re in the process of buying the vehicle, make sure the numbers match. CR also offers a smart tip to “negotiate the bottom line, not the destination fees.” Work toward whittling down the total price and not the destination fee on its own.
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