Why the new-car destination charge is the worst fee to pay

Unfortunately, the price you see when automakers advertise a new car isn’t the price you end up paying. We’re not even talking about taxes. We’re talking about the destination charge. Even after haggling or finding a discount to lower the car’s cost below the manufacturer’s suggested retail price, a destination charge typically adds at least $1,000 to the car’s price. But why?

Consumer Reports recently examined the rise of destination fees and found they’ve climbed from an average of $839 in 2011 to $1,244 in 2020, a massive 48% increase in less than a decade. Over the same period, the price of an average new car has risen “just” 27%. I join CR in calling for destination fees to be made part of MSRP and not a footnote to it.

Even if integrated into MSRP, another issue would linger: The distance to a buyer’s destination. Yes, cars are big, heavy things that need to travel thousands of miles to buyers — except when they don’t. How many people in suburban Detroit live a few miles from the Ford plant in Wayne, Michigan, but paid the same $1,195 destination fee on a new Ford Ranger that I’d pay here in San Francisco? The same might be asked of new Hyundai Sonata buyers in Alabama who paid $1,005 to ship a car that was made in Montgomery, Alabama.

Destination fees are likely a nice profit center for carmakers, but I can’t say that definitively because there’s little transparency about what goes into them or why they differ radically between makes and models. But I do believe shipping and dealer prep are as essential a part of bringing a car to market as conducting crash tests and should be folded into MSRP the same way. 

Watch my video to learn why destination fees soldier on as they have for generations and what stands in the way of any carmaker breaking with that pricey tradition.