What are Destination Charges?
Have you ever wondered what you're paying for when you buy a new car and the paperwork lists tax, license and destination charge? What is the destination charge all about? 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. The fee is usually in the neighborhood of $400 — $800 per vehicle and no amount of negotiating will make it 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 — not so. The destination charge is calculated by each manufacturer based on something called an "equalized delivery." In other words, they factor the cost of shipping all vehicles in the line and "equalize" the cost so the fee is "equal" for all car-buyers.
It's Government Mandated
The destination fee should be regarded as yet another cost of doing new car business. There are several other fees that manufacturers must bake into the price of their new cars and trucks, but the U.S. government has required this fee be itemized on the sticker based on the fact that it is a direct cost, above and beyond the "overhead" companies must incur in bringing a product to market. Tax, license and a detailed list of all the standard and manufacturer-installed options and their retail prices must also be clearly listed on the "Monroney label" of each new car.
Truth be told, most manufacturers use the same pool of U.S. freight carriers — each competing for their transport business with the professionalism and care the manufacturers demand. With this in mind, the fact that the fees are basically comparable to each other isn't too much of a surprise. Of course, high-line vehicles must be handled with even greater care and, in some cases, transported in covered vehicles.
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 United States. So who pays for the international shipping? Well, you do. That cost is factored into the U.S. pricing on individual models by the American headquarters of each import manufacturer. For example, it may cost $500 per vehicle to ship a Mercedes C-Class from Germany to the Port in Florida. Mercedes-Benz USA, Inc., who is responsible for pricing in the U.S., must factor that 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 when they are actually at a price disadvantage right from the start.
Things Have Changed
From an historical perspective, there was a time when you could travel to Detroit and pick up your vehicle direct from the manufacturer, thereby eliminating 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. BMW, for instance, has had a "European Delivery Program" that offers large discounts — up to 7% of the total cost of the vehicle — when you travel to Europe to take ownership of your new vehicle. This program includes your personal ground transportation from the airport to the designated drop-off point and back and insurance while you drive your new BMW during your vacation. All registration, customs, U.S. port processing and handling fees are included in the discounted price and the savings can pay for your trip. For instance, European delivery of a new 760Li sedan will save you $8,105 off the $115,800 American MSRP. Mercedes-Benz, Volvo, Saab and Porsche offer similar programs, each with unique advantages.
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.