A New Way for Car Dealers to Make Money

Buy the car, but watch out for extra fees

Buy the car, but watch out for extra fees

Here’s an example of car dealers getting special treatment in these hard economic times:

The legislature in my state, Washington, has approved a new law allowing dealers to triple the $50 “document fee” they charge customers.

The law has one purpose: to help out struggling auto dealers by increasing a fee that goes straight into their pockets. In my opinion, it’s another hurdle for struggling consumers who need to buy a new car.

The prime sponsor of the bill is state Rep. Dean Takko, who told lawmakers at a recent meeting,

They’re hurting, and I don’t mind giving them a hand if this is something that they really need.

Hey Dean, if you’re going to help auto dealers, why not extend your generous helping hand to all the other struggling businesses? I know espresso stand owners are hurting right now, too. So are newspapers and radio stations and home builders. How about a special law allowing them to charge more, too?

This isn’t a law that will help out dealers as much as it will further gouge the consumer. The law is asking us to prop up a sagging industry by throwing an additional hundred bucks into the dealer’s pocket and getting nothing in return. If buying a car from a dealer isn’t enough to keep that dealer afloat, let it fail, and let the stronger ones survive.

There is good news included in this law, though it’s buried: The state requires dealers to notify consumers in writing that the document fee is negotiable. Problem is, the notification is made during the signing process, after the deal is made. 

Fellow cargurus, watch out for similar laws popping up in states across the country, and if you are in the market for a car, make sure you negotiate on the dealer documentation fee. Pay what your state charges the dealer to file your paperwork, and no more.

Do you think dealers should be able to increase their documentation fees in hard times?

-tgriffith

4 Comments

  1. When I purchased a used Trailblazer this past December, along with getting them to reduce the price by more than $1000 and put on a new set of tires, I also took a look at the settlement sheet and crossed off the $70 document preparation fee, telling them I wouldn’t pay it. They said they had to charge the fee, so I got up and started to walk out. Guess what? They decided that selling the vehicle was more importantant and they would still make some money on the deal. Bottom line is simple– When you are the buyer, you should look at ALL charges as being negotiable, and your best leverage is to get up and walk out if you need to. I’ve only had to actually walk once, and the dealer called the next day and said they changed their mind. These fees are simply a way to enhance profits in a deceptive way, and shame on all states that allow them to get away with it.

  2. Tgriffith once again your ahead of the game. The car industry is in panic mode and dealers are looking to find and utilize any new fee they can. They assume the consumer is non-the-wiser and then they take advantage of that. Thanks for getting out the information so the car shopper can make an informed decision and be a smart negotiator.

  3. You’re dead wrong on this big guy. State DMV’s have pushed the costs and responsibilities of titling, collecting taxes, recording liens and registering vehicles off the of state DMV’s and on to backs of dealers. Dealers now have to employ more office staff to handle the increased work loads and pay software licensing fees and electronic funds transfering fees to comply with new DMV requirements. It may seem simple to you but $150 doesn’t even come close to covering costs associated with handling all the paperwork of the deal after you sign the contracts and take delivery of your new car. And you want to pay the dealer $200 profit? LOL – The average transaction requires that the dealer generate a gross margin of $1750.00 just to break even. To do that, most NEW CARS would have to be sold at or above sticker price. 90% of new car dealers, both domestic and import, LOSE money selling new cars and trucks in this competitve market. Thank God for Used Vehicles.

  4. You’re the man, tgriffith. Always spot on. Why are car dealers given such support to remain in business? I love cars, but the dealer system seems corrupt.

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