A new year resolution: question “doc fees”

The end of the year …  time to review, cull, and shred old case files.  A veritable trip down memory lane, reminding me of all the clients I helped and those I was unable to help.

Some of those old files contain purchase orders and financing contracts for cars.  Just on a whim, I pull them out and start perusing the columns itemizing the elements of the car purchase.  Down towards the bottom is an item usually labeled “Documentary Preparation” or “Documentation Fee.”   The amount of the so-called “doc fee” is usually pre-printed on the dealer’s paperwork.  That’s done to suggest that it is a government-required and non-negotiable charge.  It isn’t.

Here’s one from 2001 from Dartmouth Dodge.  The doc fee is $195.  Here’s a real nostalgia item,  from an Abington used car lot in 2004  — just $50.   Another small used car lot in Somerset in 2008: $99.  Route 6 KIA, 2011:  $289  — printed in red, nice touch.  McGee Chevrolet, 2010:  $390.  But the king of the doc fees, hands down, is Empire Hyundai, which since at least 2008 has been charging $495.  It’s printed in bold type right above the $29 Inspection fee, which really makes it look like a required third-party payment.

What is a “doc fee”? It depends whom you ask.  McGee Chevrolet’s invoice uses the alternate term “customer service fee” to describe the $390 charge, while Route 6 KIA uses “Seller’s administration fee.”  Sometimes dealers claim that it’s for filing required documents with the Registry of Motor Vehicles.  But that can’t be,  because those charges are itemized separately.  Sometimes they say it’s a fee charged to the dealer by the lender who buys the installment sale contract.  That is inconsistent with the fact that the dealer charges the fee whether or not it is arranging financing.  Sometimes they say it’s for the convenience of taking care of the registration paperwork rather than making you go to the Registry yourself.    How much is that convenience worth to you?   In a case brought by the Ohio Attorney General’s Office, charging that a dealer’s “delivery and handling” fee was unfair and deceptive, the defendant dealer was claiming that the fee covered everything from key duplication, file folders, inspecting and detailing the car, and paying property taxes and insurance on vehicles in the dealer’s inventory.  So it depends whom you ask, but the problem is, most buyers never ask at all.

The bottom line is that the “doc fee” is an additional charge for the dealer’s overhead.  That’s deceptive.   In the American marketplace, it’s generally understood that a quoted price includes the seller’s administrative overhead and profit margin.  If carrots are $1.99 a pound, you don’t expect the cashier to add on 30 cents for the store’s refrigeration system!   If blue jeans are labeled $40, you wouldn’t pay an extra dollar to the clerk for cutting off the security tag!  Adding a “doc fee” to the agreed-upon price of a car amounts to the same thing.  And as this practice has gone on unchallenged for years, the money involved has grown from a nuisance to a substantial burden.  No one I know would suggest that a $495 bump-up in the price of a car is trivial.

Why doesn’t someone sue to stop this?

Well, to be worthwhile, a case would need a plaintiff buyer who was misled as to some aspect of the charge:  that it wasn’t advertised, was slipped in after a bottom line was negotiated, was falsely misrepresented as being mandatory, or whatever.   But often, in the fog of car buying, juggling the trade-in value, trade-in payoff, manufacturer’s rebates, GAP, VSI, and other unfamiliar acronyms, customers just don’t see, don’t ask, and don’t try to negotiate the fees proposed by the dealer.  Sometimes they don’t even try to read through the finance contract, beyond the disclosure of the monthly payment.  If you don’t appear to care about the price, it’s hard to complain you were overcharged.

In 2012, resolve to be a smart car buyer.  Read the contract and question the fees, especially the big ones, starting with the “doc prep” fee.

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