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Tuesday 25 July 2017
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Understanding Destination and Regional Advertising Charges

Understanding Destination and Regional Advertising Charges

In this age of dealers having to show prospective buyers the factory invoice to make a sale, people often question two charges that show on the factory invoice:  one is the destination charge to get the vehicle to the dealership, and the other is advertising fees assessed.

Let’s talk about destination charges first. 

This is the charge to get the vehicle from the factory to the dealership.  Many years ago, people actually were allowed to go to the assembly plant to get their vehicle and were able to save that fee.  That practice is long gone.

Every automaker charges for transportation, but it is important to note that the fee is only charged based on train and/or trucking fees within the United States.  If a vehicle is built overseas, getting it to U.S. soil is built into the base price of the vehicle.

It is important, too, to know that the charges are averaged, so every consumer pays the same.  If your vehicle is assembled in Michigan, the transportation fees are the same if you live next door to the plant, or if your vehicle is being shipped to California.  Transportation charges are averaged to keep one area from having a price advantage over another.

Most of the vehicles I review today have delivery fees that average around $1000.  In recent weeks, the Mercedes SL450 delivery fee was $995, the Chevy Silverado 2500 I had was $1195, the 2017 Jeep Wrangler I had was $995, and the Chevy Colorado was $940.

I have had listeners question the freight or transportation fees that dealers charge, thinking they were being gouged.  Your failsafe is the fact that by federal law, true transportation charges are broken out on the Monroney sticker, or window sticker as most people know it by.

Advertising fees are harder for people to accept. 

Most of the fees are for regional advertising, which is usually tailored to a specific area.  Ads you see in Houston may be filmed with local landmarks like NRG stadium, in Dallas with AT&T stadium or the Texas State Fair as a backdrop, and in the Pacific Northwest, you are likely to see snow and mountain ranges.

The ad fees can vary, sometimes a flat fee per car, and at other times it is a percentage of the MSRP, so the more expensive the vehicle, the higher the fee.  This was the case when I was a Ford dealer.  At that time, it was 1.5% of the sticker price of the car, so if it was a $30,000 vehicle, the regional advertising was $450.  As I recall, that fee later went to 2%, and frankly, I don’t know what it is today. Last I checked, VW for instance, charged $150 per vehicle flat.

It is logical to ask why a consumer should have to pay for advertising fees. Simply put, it is a just cost of doing business. The auto industry, being about the only industry that has to prove what it paid for a product, shows the advertising fee as a line item on the factory invoice for accounting purposes.  Dealerships have no choice but to participate and it is a real cost to them – but it is built into, not an add-on – to its true cost of the car.

If a consumer goes out to purchase a new Samsung refrigerator, the cost of advertising is built in, but since people do not ask department stores to show them the factory invoice, the consumer does not realize they paid for the ads they see on TV.

In my years as a dealership owner, I saw many people who questioned the transportation fee and the advertising fee, but the truth is, it is a real cost to the dealership and they have no choice but to pass it on to the consumers.



Photo Credit: BMW