BUYING a new car could soon come with a surprise fee, and it’s not from the automaker.
A fresh law is poised to raise what drivers pay before they even leave the dealership.
Most shoppers will see the full fee added to their total (stock image)[/caption]
The new charge is tied to the paperwork needed to finalize a vehicle sale.
In California, lawmakers have just voted to increase the cap on what dealerships can collect as a “documentation fee,” or “doc fee.”
Right now, the fee is limited to $85, but the new law allows up to 1% of the car’s price, maxing out at $500.
That means most new car buyers in the state will likely be hit with the full amount.
With new car prices nearing $50,000 on average, the added cost could feel like a punch, according to Car and Driver.
The fee covers the processing of sales contracts, title, registration, and other forms.
Supporters have said the price reflects modern business costs for car dealerships.
“This legitimizes the doc fee and cuts against this idea that it is just a junk fee,” said Brooke Conkle of law firm Troutman Pepper Locke.
But critics say the new price tag is yet another way for dealers to cash in on consumers.
Senator Dave Cortese was the only lawmaker to vote “no” on the increase, saying he plans to push for a lower cap when the bill reaches the Assembly.
The California New Car Dealers Association has backed the change, calling the $85 cap outdated.
They point to the national average document fee, which now sits at $433, according to Kelley Blue Book.
Meanwhile, some states allow even higher fees, with no cap at all.
In Florida, for example, document fees can max out at $1,000.
Dealership Tips
Here are some expert tips when purchasing a car from a dealership lot:
- 1. Set your price: Ensure you’ve calculated your monthly budget before going to the lot. You should include the car’s loan payment, insurance costs, fuel, and regular maintenance.
- 2. Research: Make sure you know which cars you’re interested in test driving before you reach the dealership.
- 3. Pre-approval: Secure financing before you go to the dealership. Dealerships may give you a better interest rate if they are competing with an outside bank.
- 4. Test away: Get behind the wheel before making any payments. A car purchase will be worth thousands of dollars – drivers should ensure they like the drivetrain, steering feel, and comfort of the car before taking it off the lot
- 5. Haggle: Drivers should always try to negotiate the price. There are so many good cars on the American market – buyers have a strong hand when negotiating price.
Source: Kelley Blue Book
“There is nothing that says the consumer cannot negotiate out that dealer fee,” said Ted Smith, president of the Florida Automobile Dealers Association.
While not required, dealers must disclose the fee to car buyers.
However, back in California, the timing couldn’t be worse for shoppers.
Nearly 20% of new car buyers are now paying $1,000 or more each month.
Loan lengths are also climbing and average monthly payments are creeping up.
Adding $500 more to the total may seem minor, but it adds up fast over a multi-year loan.
A federal crackdown on such fees was floated last year by the Federal Trade Commission.
The agency had proposed rules under its CARS Act to restrict fees and marketing tactics.
But in January, a court ruled the FTC hadn’t given dealers proper notice, and the Trump administration dropped the effort.
Now, state lawmakers are left to decide what’s fair – and what’s just another line item.
