Documentation fees, or doc fees, are sums charged by a car dealership over and above the price of the car itself, to cover paperwork expenses. The expenses covered include preparing and handling titles, registrations, and other administrative processes involved in transferring ownership of a car to you, the end purchaser.
Inquiring about a car dealership’s doc fees is a wise step to take when you’re shopping for a new vehicle. In a full 40 states, or 80% of the USA, car dealers are free to assign whatever amount they want as doc fees. In some states, such as Florida, dealerships routinely charge as much as $1,000 and sometimes more simply to handle the paperwork related to the purchase of a car. Negotiating on the basis of doc fees is not quite as straightforward as you might assume, but knowing them is the first step towards trying to save some money on these sometimes exorbitant charges.
Currently, ten states set caps on car dealer doc fees by law. These are California, $80; Illinois, $166; Louisiana, $200; Maryland, $300; Michigan, $190 or 5% of total purchase price, whichever is lower; Minnesota, $75; New York, $75; Ohio, $250 or 10% of price; Oregon, $75, or $100 for electronic filings; and Washington, $150. These laws are subject to change at any time depending on the decisions of the state legislature.
States can opt to institute new doc fee caps, remove the existing ones, or change the cap through normal legislative process. Texas recently dropped its $150 maximum and now permits dealerships to charge any fee desired. Additionally, maximum doc fees (in those states which enforce them) tend to rise over time in recognition of the fact that car dealerships have genuine administrative expenses to deal with. For example, California’s maximum increased from $55 in 2011 to $80 in 2018.
Keeping the Doc Fee in Mind While Buying
An interesting legal detail applies to negotiating about doc fees; once the dealership has set a documentation fee, it must charge precisely the same fee to all purchasers, in order to prevent lawsuits from previous customers to recover the fees they paid. While most states allow dealerships to set their own doc fees at whatever level they prefer, a universal legal obligation to keep that fee unchanged between customers then comes into force due to the structure of the legal system.
Thus, you cannot ask your dealership to lower their doc fee as part of the negotiating process. Due to the risk of lawsuits, they are unable to oblige, so asking them is useless. Instead, your best bet is to negotiate for a reduction in the total sale price of the vehicle that is large enough to mostly compensate for the doc fee, if the charge seems excessive. A doc fee of $200 to $250 or lower is probably not worth haggling over.
For example, if you find out that the dealership’s doc fee is $1,000, offering to purchase the car at $800 less than the offered price eliminates most of this excess charge from your perspective without directly addressing the unchangeable fee itself. The dealership still harvests its $1,000 doc fee, while the $800 is discounted from some other portion of the final purchase price (probably somewhere that minimizes its impact on the dealership’s bottom line).
Researching Doc Fees and Other Charges
While the doc fee appears printed on the purchase contract, the salesmen dealing with you have no obligation to point it out during the signing process. Other fees may also appear there, including paint protection plans, VIN etching on the windows, and the like. Many of these subsidiary services can be obtained elsewhere for much less (dealerships frequently overcharge for VIN etching), and a high doc fee may be a warning sign that other, more optional fees are also being inflated.
Dealerships may not divulge their doc fees prior to selling you a car, but it is still possible to research if your friends and family have purchased vehicles recently at area dealerships. They may know the doc fees or be able to quote them from sale documents still in their possession. In this case, you can compare the probable charges from various local dealerships, getting a feel for the regional average. This information enables you to spot fees that are excessive for your area of the state, allowing you to know when negotiation – or even taking your business elsewhere – is prudent.