The Questionable Documentation Fee At Car Dealerships - And Response (2)

  • Saturday, March 24, 2018

I am in the market for a newer car. Not new, used. My experiences with dealers here and surrounding states mystifies. One dealer charges no documentation fee while another, same town, charges $300, $400 and up to a $1,000 documentation fee. The arbitrary charges from one dealership to the next is an obstacle to purchasing a car. 

Imagine, if you will, that when you went to the grocery store and an additional fee is added onto your bill.  Or, try this one, the doctor visit has a "user fee." 

As a consumer it would seem that other then me what are these charges for?  Let me give you just a few of the many that I have heard. One said the money is for the "girls in the back."  I suggested to him that as an accounting major could I be one of the girls? Another suggested it was state law. Still another said the fee was for the salesperson. Again, another question and I would be first in line for  sales job if that fee was to pay the salesperson. Another insider at one of the larger dealerships here in Chattanooga said, "honestly, it pays for the dealer's Olympic size pool.   

That extra fee and often in the many hundreds reduces the value of your trade or adds to the price of the car you wish to buy. My experience in cars both sales and ownership was that the used car sale paid the profit to the dealer, often substantial. The service function was considered paying for overhead of the dealership.

Maybe someone can explain to me the rationale for excess fees when buy a car?  Maybe it is just plain greed? 

Robert Brooks

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I am not a dealer or involved in the car business in any way, shape, or form. However, I can tell you from the many transactions I've done that dealer fees, documentation fees, origination fees or any other fee should be absolutely meaningless to anyone buying a vehicle. You shouldn't even be trying to apply rhyme or reason to these fees because there aren't any.
 
You see, the dealer can add on any fees that they think they can get away with in order to increase the price you pay for the vehicle. They can charge you $1 for the car and $8,000 for "because I can fee" if they think they can get away with doing so.
 
The only thing you should be concerned with is the bottom line dollar amount that you pay for the vehicle. Let the dealer figure out how they want to assign purchase price and "because I can fees" in any way they see fit so long as it doesn't change the bottom line dollar amount that you pay for the vehicle.

I can't tell you how many times I've walked away from a deal because they "were losing money" at the price I was willing to pay. I don't think I've ever done a deal with a salesperson. It always ends up being the sales manager or the general manager that ultimately makes the deal that I want to make on a vehicle. Honestly, if you make a deal with the salesperson, you probably paid too much for the vehicle. I've walked away from deals at the closing table because they tried to add in some bogus fees that increased the bottom line price that we agreed upon. I've even had a general manager call me days later, after walking away from a deal, to tell me that they will make the original deal that I had on the table. Patience and a willingness to walk away are your best friends when negotiating a car deal.

The bottom line, know your numbers and know what you are willing to pay for the vehicle. Let the dealer figure out how to make that number work. If they can't, or won't then move on to the next deal. It can be frustrating but it can also save you a lot of money.

John Hodge
Hixson
 
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When you closed on your house, did you tell the lender to waive the origination fee? No. It is nothing but profit for the lender. No one complains about it, but in effect it raises your APR.
  
Carmax may not have a doc fee, but they won't discount their vehicle. You pay the price they tell you. They are very profitable. This is where you go if you like to non-negotiate.

If you have bought 10 or 12 vehicles from  dealerships over the years, you may think you have skills. Think again, because the dealership sells 10 to 12 vehicles a day. If they allow you to leave after you refused to negotiate your offer, it's because the offer is not profitable. You want to pay what the dealer paid? Buy a franchise and put your name on the building. Goodwill Industries marks up the items they got for free, do you walk out on them? 

If you shop for medical, auto, or homeowners insurance, please be aware that the insurance agent can't change your premium one penny. He/she can change your coverage to help lower your rates, but they can't discount the policy. You can't run to the underwriter to get a better rate, either. The car salesman has the same function as the insurance agent. They both present you with figures based on your particular circumstance. 

Imagine, if you will, that when you went to the grocery store, movie theater, or sporting event, and they told you what to pay for your items, that you offered to pay less, and that you would walk away if they did not take your offer. You would at a minimum be told to move on, get out, and the other  customers would laugh at you. Try to negotiate your cart full of goods at COSTCO. Tell them you will walk away if they don't take your offer.  

If you want the lowest price, buy the lowest priced car you can find. Look on Craigslist. Don't expect it to have any warranty.
 
If you want a vehicle that best meets your needs, do some research, find it, and buy it. Reputable dealers recondition used vehicles, and by the way, if you are trading in a car, will you offer a warranty on it?  Why should a dealer repair a vehicle for you if you did not purchase an extended warranty? 

 A vehicle that is priced too high for you just might be perfect for the next person.
 
William Hopkins
Opinion
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