When it comes to evaluating new car prices, so-called Advertising Fees can add up to hundreds of dollars worth of unanticipated cost. Also referred to as a marketing assessment, the fees are not advertised and are often buried in paperwork usually accessible in the final stage of purchase. But what are Advertising Fees? How are they calculated? And why do we have to pay them? Here's what you need to know.
What are advertising fees?
The advertising fee is a cost associated with marketing a vehicle in a given area. When you see a local advertisement on the internet or on TV, chances are it's being paid for by a regional advertising association.
Regional advertising groups pool resources to advertise new cars and incentives. Not all regions have the same type of associations and not all dealers may choose to contribute. For example, a Honda dealer in San Francisco may assess a Honda Dealer Advertising Group (HDAG) fee, whereas a dealer across the bay in Morgan Hill may not.
Assuming you aren't paying full MSRP, chances are the dealer is factoring the cost into their quoted price. This is because Ad Fees are a component of the dealer's invoice. When that's the case, this can create a disparity between quoted prices equal to hundreds of dollars, throwing off traditional price comparisons.
How are Ad Fees calculated?
The method by which Ad Fees are calculated varies by brand, by region, even sometimes by model. Sometimes the fee is calculated as a percentage of the configured vehicle price whereas other times it may be a fixed amount. For example, Volkswagen uses a modest $150 fee, whereas Lexus generally uses an amount equal to 1.5% of the MSRP.
The most we've seen charged is about 2% of the MSRP, equal to $600 on a $30,000 car. On some luxury cars, the number can easily exceed $1,000- not a small amount. Not all automakers assess an Ad Fee. For example, most of the Fiat Chrysler brands (Dodge, RAM, Chrysler, etc.) generally do not.
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Why do I have to pay them?
Ad Fees are an odd fee to have to justify paying as a customer. Why should a buyer pay for a commercial?
The answer has to do with the fact that advertising is considered a cost of doing business and that this is passed along to consumers through the invoice price.
Whereas the MSRP is essentially the same across all regions, invoice prices can vary. That's because the cost of doing business can vary between regions.
Unfortunately, there isn't really a way around paying the fee. If it sounds like a dealer is waiving it, odds are that some other aspect of the transaction is being adjusted behind the scenes to absorb the cost.
Questions shoppers should ask
It's important to understand what you're paying for. However, this can be challenging since Ad Fees are often cryptically listed on the invoice.
If a price sounds too good to be true or doesn't mesh with what other dealers are quoting in a given area, be sure to ask if routine fees like the destination charge and any advertising fees are being included. No one likes surprises, especially when getting ready to sign on the dotted line.
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