Here's what a destination charge means and how it's calculated

October 21, 2016

Picture this: You're sitting at home one night watching TV or flipping through a magazine when you see an ad for a shiny new sports car whipping through a curvy canyon highway—or maybe it's a rugged pickup kicking up a cloud of dust in search of adventure.

The announcer screams at you, "$29,995!"

You think to yourself—wow, that's a lot of car for under $30,000! 

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But then you visit the automaker's website to find that even the most frugal version of this vehicle will set you back almost $1,000 more than that memorable advertisement. And if it's a pickup, you're suddenly on the hook for an extra $1,200, and you haven't even begun adding options.

It's called the destination charge (or the delivery charge, or the handling charge, or "D&D"), and it's not always prominently advertised or displayed on a car manufacturer's website.

The worst part for consumers? There's no way to get out of paying it.

2017 Kia Sedona

2017 Kia Sedona

It's a mandatory line item listed just before the final MSRP, or manufacturer's suggested retail price, on the federally-mandated sticker hanging in a new car's window in the showroom. 

This charge is ostensibly supposed to cover transport of the vehicle from its assembly plant to the selling dealer, and most manufacturers calculate it about the same way. But there's a lot more to it than just directly passing on the cost of shipping a car, especially since new cars sold in the United States are built on every inhabited continent. A factory may be in your hometown, and all it takes is a truck to haul that new car away from the assembly line.

Or that car may have been assembled in Australia, as is the case with the Chevrolet SS, shipped by truck and rail to a port, where it's loaded onto a massive ship that sets sail for the port of Long Beach in Southern California, only to face the prospect of more train and truck time. It's not unreasonable to figure that your SS has traveled 10,000 miles by the time you take delivery of it, even if its odometer only shows 10 miles on it. 

Crunching the numbers

Most automakers operate about like Honda, which charges of the lowest delivery fees. Right now, Honda tacks on $835 for cars and $900 for what it deems light trucks—HR-Vs up to Ridgelines. Honda plans ahead for the next model year by taking its previous year's average shipping cost and assuming a modest increase in the cost of doing business. It's basically fuel hedging, the same thing that helped keep Southwest Airlines profitable during the dark years other airlines faced. But it may not always work out in the automaker's favor. 

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It's an average for all cars, regardless of where they're built. For instance, Honda builds its Civics in Ontario and Indiana, and its new hatchback will be screwed together across the Atlantic in England. But all have the same $835 destination charge for model year 2017.

And that's sort of a simplified version of what most brands do, although some look more closely at individual models. For example, the destination charge is $875 for a Ford Fusion but $900 for a Ford Mustang. 

2017 Fiat 500X

2017 Fiat 500X

Not surprisingly, transporting a big pickup costs even more. Stretching several feet longer than a compact sedan, a full-size truck takes up more room on a rail car or a big rig trailer. Today, all of the major domestic truck manufacturers levy $1,200 for their destination charges. 

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