Automakers routinely charge a mandatory “destination fee” alongside the price of every new car. And that fee is going up, much more than it has to.
That’s the conclusion of a new study from Consumer Reports. CR looked at the average automakers charged in destination fees over the last decade and found that they have risen at 2.5 times the cost of inflation since 2011. That year, the average destination fee charged by automakers was $839. In 2020, it was $1,244.
The fees are often a shock to buyers. CR explains, “The fees appear as a line item on car window stickers at dealerships. But they’re rarely baked into the prices in car ads or clearly listed on automaker websites.” Thus, shoppers reading the Manufacturer’s Suggested Retail Price (MSRP) can be surprised to find that the actual price of the car is more than a thousand dollars higher.
In theory, the fees cover the cost of getting the car from the factory to the customer. It’s a fee the manufacturer charges the dealership, and the dealership passes it on to the customer. Thus, dealerships will generally tell customers it’s non-negotiable.
But there is little transparency into their calculation, and they seemingly make little sense.
Ford’s Hermosillo, Mexico assembly plant, for instance, spent part of 2020 manufacturing the Lincoln MKZ, then switched to building the new Ford Bronco Sport. The MKZ carried a destination charge of $995. The Bronco Sport carries a destination fee of $1,495 – to ship from the same factory to the same U.S. dealerships.
Audi charges $1,045 to ship the 2021 Audi A6 sedan from factories in Neckarsulm, Germany; ChangChun, China; or Aurangabad, India to the United States. Ram somehow charges $650 more than that to ship its 1500 pickup to American dealers from…Sterling Heights, Michigan.
Some Charges Rise as Much as 90 Percent
CR cites Stellantis (the company formerly known as Fiat Chrysler) as among those with the biggest hikes. “Destination fees rose an average of 90 percent on Chrysler, Dodge, and Jeep vehicles; 74 percent on Ram trucks since 2011; and 114 percent on Fiats since 2012. The charges on one model, the Jeep Cherokee, rose to $1,495 from $995 in 2016, a 50 percent increase in just three years,” they note.
Automakers claim there is some reason for the increase. A GM spokesperson told CR that freight and logistics costs have increased, and noted that increasing SUV sales have triggered higher delivery costs. “The bigger the truck, the fewer you may be able to fit on carrier/rail car,” he explained.
However, the report noted, Audi, BMW, Infiniti, Lexus, Lincoln, Mercedes-Benz, and Volvo had all managed to keep increases below 20 percent across the decade, though most of them have also seen dramatically increased SUV sales.
Jack Gillis, executive director of the Consumer Federation of America, says “there is no reason why destination charges are not incorporated into the cost of the vehicle, except that it enables the manufacturer to charge more.”
CR’s proposed solution is “calling for rules requiring automakers to include destination charges in their advertised and online prices—and not just in the footnotes.”
