By on July 4, 2012

Despite the Golden State being 16 billion dollars upside down and spinning towards bankruptcy, its legislators still find time to concoct regulations to confound the thousands of franchised and independent auto dealers within its borders. These statutes are always enacted to “protect the consumer.” That may not be the case this time.

Effective July 1, California Law AB 1215 will allow dealers to charge car buyers up to $80 for the so-called documentation fee, up from the previous $55 cap. This charge, rationalized by the retailers as needed to “process your paperwork,” is universally loathed by customers. Most states do not regulate this cost, leading to tales of retailers extracting up to $495 for this phantom fee.

InCalifornia’s case, the increase came as a trade-off to ease the pain of several new regulations for their dealers, despite them already being burdened with more DMV laws and paperwork than in any other state. The silliest one is designed to help car buyers know when they are purchasing a unit with a branded title – a vehicle that has been totaled and rebuilt, been in a flood, or is a manufacturer’s “Lemon Law” buyback.

There are strict state and federal disclosure requirements and severe penalties already in place for failing to disclose a branded title vehicle. But that is not good enough for Sacramento. AB1215 requires dealers to place red stickers on each such car, alerting consumers to the branded title.

California reckons that the slimy lot owner who is falsifying, or “washing,” titles on his rebuilt wrecks is going to think, “Well, they got me now. When I put those red stickers on my salvage cars, everybody will know. Dang it!”

These new laws means all automotive lenders have to rewrite and distribute new retail and lease contracts to California car dealers, reflecting these changes. The banks also have to make some monumental verbiage changes to the contracts, such as:

  • Change “Document Preparation Fee” to “Document Processing Charge”
  • Change “License Fee” to “Vehicle License Fee”
  • Change  “Smog Fee” to “Emissions Testing Charge”

Over the past few months, thousands of man hours and millions of dollars have been spent by lenders and dealers’ computer programming companies as they scramble to arm the dealerships with the new paperwork.

The problem is that after July 1, there will be many dealer finance managers who either missed the memo or are so busy selling their clients warranties or paint protection that they will accidentally use the old retail or lease contract. When they submit it to the lender, it will be summarily rejected, meaning the dealership will have to bring the client back into the store to sign the correct contract, one of the most tricky transactions for both car buyer and car dealer.

And that unhappy buyer had just paid $80 to ensure the dealer did the paperwork correctly….

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16 Comments on “Tales From The Cooler: California “Helps” Car Buyers By Raising Documentation Fee...”

  • avatar

    I’ve seen the admin fees as high as $999 here in Ottawa, Canada, and probably higher in some cases when buyers just aren’t informed and are just elated that they were approved by the lender to buy a car at all. We don’t charge admin fees at our dealership. Just like customers hate to pay it, we hate to ask for it. Much simpler that way…

  • avatar

    In Nevada, some dealers charge $400 – and you still have to go to the DMV to get your own plate.

    I asked the paperwork gal if she was making $1600/hour, because it took her 15 minutes do do my paperwork.

  • avatar
    Point Given

    It’s a fees world, give the car away at near cost, whack with fees. We re-pdi (bullshit) $395, doc fee $289(bullshit), $199 vehicle etch (yet more bullshit).

    Here’s a hint for you, not a dime of that goes into the finance office profit, it all goes to sales gross.

    Car dealerships in many ways deserve the vitriol and anger directed at the sales process.

  • avatar

    Here in Utah the “Ripoff Fee” is high as well, I’ve seen it as high as $499.00.. Even small rinky-dink used car dealers try to charge it.

    When I’m car shopping, if I find a car worthy of an offer I tell the salesman or the manager right up front I’m not paying a doc fee and I always negotiate on an OTD basis. I tell them if a doc fee appears on the paper work I’ll walk. Sometimes it works other times I’ve walked.

    • 0 avatar

      At least here in Florida, the doc fee must be disclosed and must remain consistant, i.e. it can be negotiated around or ‘backed out’ of the top line, but it must still be shown.

  • avatar

    Just buy your car off craigslist from a private party, do a carfax, have a mechanic check it out (if you don’t gots skillz)and BAM no documentation fee.

  • avatar

    I don’t know what to think except that I’m real happy to live in Texas.

  • avatar

    Yeah I’ve seen these fees too, they make me quite a bit upset, I feel like dealers are trying to nickel and dime me for the costs.

    • 0 avatar

      I tried to post this earlier but somehow the forum ate my post.

      The dealer fee is basically built in overhead protection for the dealership. Of course it doesn’t cost anywhere near $500 to do the paperwork, but that cost covers paperwork, accounting department salaries, clean up, fuel, and incidental costs plus some profit.

      There are dealers who advertise no dealer fee, but they have the same costs as dealers that do, and they just build it into the bottom line of the vehicle. If you negotiate based on an ‘out the door’ price there are no surprises and it lets you compare apples to apples for dealers with and without fees.

      • 0 avatar

        I had always heard that one of the main reason for doc fees was to screw their salespeople out of a bit of commission. If I pay the same amount for the car but $500 of the price is “doc fee” then that means the salesperson is getting his percentage off of $500 less in profit.

        Of course I realize many dealers have moved to other forms of commission such as a fixed payment per car.

  • avatar

    There is not a single function of government that could not be done better and more efficiently by private enterprise, including the only things that government does well, which are stealing, killing, and incarceration.

    • 0 avatar

      My biggest problem with that argument is that private enterprises are dependent on profit. If a business isn’t making money, it has no reason to exist.

      Government programs on the other hand are under no obligation to make a profit, so the savings can be passed on to the citizens who use the services. Since healthcare is the big topic lately let’s look there. With our current system hospitals charge much more for procedures than they do in other countries (in the US a hospital may charge $1,200 for a MRI while in Japan it’s $98) and that cost is passed directly onto the health insurance companies who then make profits for shareholders, executives, etc, passing all of that burden onto the insured. I don’t have a problem with the idea of the individual mandate, but I do have a problem with being obligated by the government to give me money to a private for-profit corporation (the same could be said for auto insurance since it’s compulsory in most states).

      A government run single-payer system that told hospitals what they were allowed to charge for various procedures would instantly reduce costs, plus since there would be no need to pass earnings along to shareholders to pay high salaries to executives the overhead would be reduced.

      There are plenty of government agencies that are run less than efficiently, and that’s a problem that should be addressed, but the solution is to fix the logistics of those organizations, not hand off their responsibilities to private enterprises that will try to milk every nickle and dime they can out of those who use their services.

  • avatar

    When I bought my car for cash, the dealer was willing to take the doc fee amount out of the purchase price. Any thoughts why that might be? It was all the same to me, I was negotiating the bottom-line amount rather than how they divvied it up.

  • avatar

    Um, because he was skimming some cash and cheating on his taxes?

  • avatar

    Just bought a car from a dealer in Atlanta, so I am making a “Top This” submission. Palmer Dodge here has a “mandatory” $599 doc fee – “It’s printed on our purchase forms and is part of our computer program.” Should have walked out the door at that point, because it was a harbinger of things to come. Nonetheless, we negotiated a price that included an additional $599 discount AFTER a healthy discount from sticker has been settled upon. I won’t bore readers with the ugly saga with the delivery of the car and a paperwork error on their part – a documentation error that delayed obtaining my registration until the last day of my 30 day tag – but just say that it was all worth it for my new Charger. Outstanding vehicle. Plus, thankfully there are three other Dodge dealers in the area so I never have to darken the door of Palmer Dodge again.

    Dealers are so short-sighted when they pull crap like $599 doc fees. This fee was a big part of how this dealer poisoned my experience of buying a new car to the degree that I will never do business with them again. But I must thank them because they taught me that any dealer that starts all their transactions with a $599 up-charge for a phony doc fee is by definition not a company a person would ever want to do business with.

    Moral of the story: After the salesman says hello, ask what the dealer’s doc fee is. If it is more than $50-$100, just turn around and walk out the door. Nothing good can come from any further conversation.

  • avatar

    Cal Worthington! I haven’t lived in Ca for 22 years but I grew up with his commercials, and those of Ralph Williams, who as I remember used to have his dog on the commercials in which he appeared. Then Cal started making fun of Ralph by having all sorts of animals in his commercials and introducing them as his dog “Spot”. He even had an elephant one time. I clicked on this post because of the picture of Cal, thanks for the memory.

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