Watch out for hidden fees when buying cars

As if semiconductor shortages and COVID-19 hadn't driven car prices high enough, automakers are ratcheting up a hidden charge most shoppers are unaware of — and which nobody seems to understand.

Meet the destination charge, also known as the second-to-last line on the window sticker, a shipping charge with an asterisk for $2,000 on a new Jeep Grand Wagoneer.

If you're a car dealer, the first rule of what's called a destination charge seems to be: "Don't talk about destination charges."

This much is clear, though: These fees are rising faster than inflation, and they tend to be higher on vehicles for which there's high demand — like pickups and SUVs. Slower-selling vehicles, like sedans, have lower destination charges, and see fewer increases.

The destination charge is not included in the manufacturer's suggested retail price, or MSRP — the price automakers and dealers advertise.

"Some automakers use destination fees to increase revenue in a way shoppers don't notice till late in the buying process," said Mike Monticello, Consumer Reports' senior manager of road tests and reviews. "We think there should be rules to include the destination fee in the advertised price, not below it in a footnote."

Neither the automakers nor dealers contacted for this column would discuss what goes into setting destination charges.

Destination charges were relatively stable for years, but Consumer Reports found they increased at 2.5 times the rate of inflation since 2011, from an average $839 to $1,244.

The destination charge on a new Mazda 6 — a sedan that sold so slowly Mazda dropped it from the 2022 lineup — was only $945.

The Grand Wagoneer, one of the hottest fall models, is a lot bigger than the 6. That could account for some of the difference. But it's not three times bigger.

There could be a number of factors going into the fee, but take another comparison. The Ford F-150 — America's best-selling vehicle — carries a $1,695 destination charge. Compare that to $995 for the Cadillac CT5 sport sedan, a slow seller built on one of the first assembly lines GM idled when the semiconductor crunch hit.

A federal law requires automakers to reveal the destination charge on the window sticker, which includes other information like standard features, options, government safety ratings, EPA fuel economy and emissions estimates, and where the vehicle and its major parts were built.

Theoretically, the destination charge consists mostly of what it costs to ship the vehicle from its plant — or port of entry, for imports — to the dealer that sells it. There may also be some payment to the dealer for fueling, inspecting and cleaning the vehicle.

Destination charges used to vary around the country, depending on how far the vehicle was shipped.

That gave dealers near the assembly plant an advantage, which they loved. Distant ones didn't. But automakers then adopted a national average for shipping costs. So now it's the same throughout the U.S., with a few minor exceptions.