THE CASE AGAINST DEALER FEES

LETTING GO OF A RELIC OF THE PAST

I have spoken for years against Dealer Fees. They are also referred to as Doc Fees, Sales Fees, Prep Fees, Closing Fee, etc.

I’m here today to ask you to finally let it go. First, there is a bit of controversy about them. There have been multiple lawsuits filed against dealers concerning the fees, and the dealers usually lose.

First, the word “Doc Fee” is usually short for Documentary Prep Fee. One of the largest lawsuits hinged on this very wording. In most states, the only person who can charge an individual a fee to prepare a legal document is a licensed attorney. Installment Contracts and Bills of Sale are legal documents.

The second issue is that too many dealers and salespeople lie about them. I personally have been told, among other things, that it is:

  • A Federal Tax on motor vehicle sales. 
  • A fee paid to the manufacturers to register the car. (Even used cars.) 
  • A surcharge by the state or manufacturer to dealers who sell vehicles too cheap. 
  • An FBI fee for accessing the Homeland Security database.
  • A fee or tax paid to local county for processing title work.   

Once, I was told it was a bank-loan processing fee. So I asked that it be removed, since I was paying cash. The salesman quickly said he couldn’t, since “Federal Doc Fee Law” said he had to charge everyone. I asked him for a copy of the law, and he said it was “illegal” to show it to customers. 

All of these reasons are complete and utter malarkey. I do not know if the sales people made it up, or was taught to say that by the dealership. I saw through the lies, and anyone else with an internet connection can, too.

Most state consumer laws require that the dealer fee be included in the ad, either as part of the advertised price, or separately stated. Problem is, most dealers ignore this. To be fair, the states aren’t enforcing it yet. But what *can* be enforced is that if your customer has a copy of that ad, he may have a case against you for Unfair and Deceptive Trade Practices. And it wont be just one. Once any decent attorney gets that case, he or she will naturally ask if all the other customers of the dealership were also similarly misled about the pricing. 

A recent case in South Carolina over the fees went against the dealer to the tune of nearly four million dollars. In this case, originally filed in 2006, the trial judge applied a ruling in another similar case and interpreted “closing fee” to mean a “predetermined set fee for the reimbursement of closing costs, but only those actually incurred by the dealer and necessary to the closing transaction.”

Under that interpretation, the dealer had to provide evidence it calculated the cost comprising its closing fee, which it could not do. This case made it all the way to the SC Supreme court. In the SC Supreme Court’s majority opinion, Justice Donald Beatty wrote that because the dealer posted a notice that it charged a closing fee “as a means of reimbursing it for certain overhead costs, the dealer clearly communicated that that the closing fee was intended to be repayment for that which was expended.”
So, what you call this fee or how you represent this fee to the consumer could wind up costing you a lot of money. Also, look at the sheer amount of time on this case, it took nine years to finally come to a conclusion. The attorney’s fees alone would bankrupt most businesses. 
If you are going to charge a Dealer Fee, find out the average for your area, and charge that. 
Another case of note was the Florida dealer who charged a $1500 fee. He then marked his cars down $1000. The state ruled that he violated the Unfair and Deceptive Trade Practices by shifting part of the sales price to the fee, and by refusing to include the fee in the advertised price, was being deceptive.  
 
Keep in mind that all it takes is one angry customer with an Internet connection and the ability to find the right someone to complain to.  
 
 

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