How to work out the out-the-door price of a car

The out-the-door price is the total you pay for the car before financing: the agreed vehicle price plus dealer fees, any add-ons you choose, taxes and government charges, minus rebates. Get it in writing from each dealer, then compare loan offers separately using the total of payments, not the monthly payment.

The formula

Out-the-door price = vehicle price + freight or destination (if not already included) + dealer fees + add-ons you chose + sales tax + title, registration and other government fees - rebates applied to the price

The trade-in and your down payment are not part of the out-the-door price. They reduce what you pay or borrow afterward:

Amount financed = out-the-door price - down payment - trade-in equity (+ any negative equity carried over)

Keeping them separate stops a generous trade-in from hiding a higher price. The FTC suggests settling the price of the car before you talk about a trade-in.

A worked example

All numbers below are invented for illustration. The tax rate and government fees are not real figures for any place.

Sample quote · Northgate Motors (synthetic)

• Vehicle price: $28,900

• Destination charge: $1,195

• Documentation fee: $499

• Sales tax (sample 7% on the three lines above): $2,142

• Title and registration (sample): $385

Step by step:

1. Price and dealer charges: $28,900 + $1,195 + $499 = $30,594.

2. Sales tax at the sample rate: $30,594 x 7% = $2,142 (rounded).

3. Government fees: $385.

4. Out-the-door price: $30,594 + $2,142 + $385 = $33,121.

What is taxable varies. In some places fees or a trade-in change the taxable amount, so ask the dealer to show which lines were taxed.

Where you live changes the inputs

• US: sales tax, title and registration fees are set by states and sometimes by counties or cities. Check your state motor vehicle agency or revenue department.

• Canada: in Ontario, OMVIC says the advertised price must include all mandatory fees except HST and licensing. Your total should be the advertised price plus HST, licensing and any optional add-ons you agree to. Other provinces have their own rules.

• Australia: dealers often quote a "drive-away" price that bundles on-road costs. Stamp duty is a state or territory charge. In NSW, for example, Revenue NSW says motor vehicle duty applies when a vehicle is first registered or transferred, and publishes its rates. Ask whether the drive-away price includes registration, compulsory third party insurance and duty.

Then compare the financing

The financing decides what you pay over time. In the sample, $33,121 minus a $4,000 down payment leaves $29,121 to finance.

• Offer A (sample): 6.9% APR for 60 months: about $575 a month, total of payments about $34,515, finance charge about $5,394.

• Offer B (sample): 7.4% APR for 84 months: about $445 a month, total of payments about $37,399, finance charge about $8,278.

Offer B has the lower payment but costs about $2,884 more over the loan. That is why the monthly payment alone is a poor way to compare.

APR vs the total cost of credit

The CFPB explains the terms you will see on a US Truth in Lending disclosure:

• APR: the total cost of credit, including the interest rate and mandatory fees, expressed as a yearly percentage. It can be higher than the interest rate.

• Finance charge: the dollar amount of interest and certain fees you will pay over the life of the loan if you make every payment on time.

• Amount financed: the amount you are borrowing.

• Total of payments: the sum of all payments by the end of the term.

APR helps you compare offers of the same length. The finance charge and total of payments show the real dollar difference, especially when loan terms differ. The CFPB says to ask for the disclosure before you sign. In Canada, the FCAC says lenders and dealers must give you a disclosure statement that explains the total cost of borrowing before the agreement is finalized.

What to ask the dealer in writing

Ask each dealer the same questions by email or text, so you have a record:

1. What is the out-the-door price for this specific vehicle (stock number or VIN), with every line itemized?

2. Which fees are dealer fees and which are government fees?

3. Are any add-ons or dealer-installed items included? What is the price without them?

4. What tax rate did you use, and on which amount?

5. If I finance with you, what are the APR, term, amount financed, finance charge and total of payments?

6. How long is this price valid?

The FTC suggests getting the out-the-door price in writing before you visit, then checking that the final paperwork matches it. If the numbers change at the desk, ask why, and be ready to leave. Our line-by-line guide to the buyer's order shows what each line on that paperwork means.

Check the dealer's math

1. Add the itemized lines yourself and confirm they equal the quoted total.

2. Confirm the vehicle price matches the advertised price or your written quote. The FTC says a fee a dealer requires to buy the car must be included in the advertised price.

3. If a rebate is applied, ask the dealer to show whether it comes off before or after tax.

4. On the finance disclosure, check that the amount financed equals the out-the-door price minus your down payment and trade-in equity, plus any negative equity.

5. Make sure no add-on appears in the amount financed that was not on the out-the-door quote. Here is how to spot dealer add-ons.

Common mistakes

• Comparing one dealer's price before tax with another's out-the-door price.

• Letting the trade-in value and the vehicle price be negotiated together.

• Accepting a lower monthly payment that comes from a longer term.

• Missing add-ons that were folded into the amount financed.

Compare two offers side by side

EasyToDecode is launching soon. It will read the quotes and finance disclosures you have, quote the figures that make up each out-the-door price, flag lines that are missing or don't add up, and prepare questions to send each dealer. See how it works or join the waitlist to hear when it opens.