Whats a car dealer documentation fee - Car Buying Advice For Rookie Car Buyers


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What's a car dealer documentation fee?

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Car dealer documentation fees vary dealer to dealer, which essentially means they're pretty much unregulated.

Each car dealer will tack on additional fees associated with filing paperwork (related to registration, tags, and title) and various other tasks linked to your car purchase. They're kind of like overhead clerical costs, and are often referred to as processing fees.

Originally, documentation fees were created as a way of increasing profits without having to take commissions into account. They were originally small and manageable (approx. $50). Now, it's not uncommon to find dealers charging hundreds in documentation fees, which quickly adds up to hefty profits if we're talking about a particularly busy car lot.

So, how do you know if the documentation fees that a dealer's trying to charge you are legitimate?
Do your research first. Contact DMV and find out what the costs and fees are related to registration, tags and title. Compare those fees to the fees that a car dealership wants to charge you. If there's a drastic difference, it's very likely the car dealer's fees are - how do we say this politely? - somewhat padded. These filing charges that DMV normally charges are paid for by the dealer, and often those charges are passed on to the buyer - which is why, in the perfect case scenario - a dealer's documentation fees should closely match the DMV filing fees.

If your prospective car dealer wants to charge you a ridiculous documentation or processing fee, be prepared to walk. Most car dealers use documentation fees as a pure profit generation mechanism for their company, so be alert. Again, look for reasonable fees associated with the filing of the many forms and documents that a car sale necessitates.

As mentioned, documentation fees vary dealer to dealer and are largely unregulated. However, some states have capped the level of documentation fees, and there are many states are attempting to enact laws which would prohibit documentation fees altogether.

Use your common sense and shop smart when buying a car. Ask your prospective dealers for a full detail of each and every fee that they'd like to charge you. If the dealer is evasive, that's a red flag. And don't be too surprised if you get different answers in response to what car documentation fees are from different salesman. Some will say that the car documentation fees are fees for doing your registration and title work, some might say it covers the receptionist's salary or other salaried employees, and yet others might say it covers some of the fixed overhead expenses each month. The truth of the matter is that car documentation fees are pure profit, and usually go straight to the owner. Knowing this fact should keep you on your guard.

One safeguard against paying outrageous car documentation fees is to only deal with reputable car dealers. Do your research online and by asking friends and family for recommendations. If the people close to you haven't been fleeced by a car dealership, there's more of a likelihood that you wouldn't be if you shopped at the same dealership.

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