Buying a car can be a pretty painful process.
Even if you ignore the ongoing supply chain shortage that’s led to more expensive prices for both new and used cars, one charge is always an insult at the end: documentation fees.
The so-called “doc fees” include the dealer’s cost to prepare contracts and other paperwork required for a sale. You can see more details on what’s included here.
In New Jersey, there is no limit to what car dealers can charge for doc fees. Indeed, you’ll see different charges from different dealerships across the state, even from the same brand name company.
This costly issue came to Bamboozled’s attention when a reader, who asked to remain anonymous, shared his experiences. He said he’s purchased a variety of cars over the years, and his doc fees were always in the hundreds, from $299 for a Chevy to $799 for a used Ferrari.
“Cars are expensive enough, let alone adding $400 to $800 to the price of the car,” he said. “This is simply a ripoff and has always been a ripoff.”
His passion about the costs was renewed when recently his son, who lives in New York, where the doc fee limit was recently raised to $175 from $75, was unable to find the car he wanted in that state. He found one in New Jersey, though, and was charged a $799 doc fee.
“Just a plain money grab,” he said.
THE LAW IN NEW JERSEY
Dealers can basically charge whatever they want for doc fees as long as the fees are disclosed.
The law in New Jersey only requires doc fees to be listed separately from fees collected by the dealer for Motor Vehicle Commission (MVC) transactions, including for temporary tags, registration, plates and title fees. Those must be itemized, MVC spokesman William Connolly said.
The average doc fee in New Jersey is $531.91, according to data from TrueCar.com. Hefty, but not as bad as the highest in the country: Florida, which has an average fee of $833.56. The lowest is California, where they are capped at $82.
So why is New Jersey among the states that don’t impose limits to protect consumers?
We tried to ask some lawmakers why, but none responded to our inquiries.
A search of proposed laws in the state found no bills were introduced to limit doc fees as far back as 1988.
As a side note, since 1998, the earliest year records are available, the New Jersey Coalition of Automotive Retailers (NJCAR), which lobbies on behalf of the industry, made more than $3.6 million in campaign contributions to lawmakers in the state, according to data from the state’s Election Law Enforcement Commission (ELEC). The preliminary amount for the first three quarters of 2021 was $103,000, it said.
It’s not a simple issue, said Matthew Hale, an associate professor at the political science and public affairs department at Seton Hall University. He noted that car lots are a huge source of tax revenue for municipalities.
“I think one of the reasons you’re not seeing state legislators take this up is that they recognize that for many municipalities, having a car lot is a really big huge source of ratables in comparison to a regular retail business,” he said.
Perhaps that’s true. But car buyers, who are also taxpayers, might not agree with that logic.
“I’m sure most motorists would be interested in minimizing their cost regarding this fee but any regulation needs to understand the issues before coming up with a specific solution,” said Steve Carrellas, director of government and public affairs for the New Jersey chapter of the National Motorists Association. “The first thing is defining what document fees are. Some of the fee goes into the cost of things dealers have to directly pay so they should be able to cover their costs.”
Agreed. We’re not suggesting dealers do this for free or even for California’s $82 fee, but $400? $500? $800? It’s hard to imagine those are the real out-of-pocket costs.
James Brian Appleton, president of NJCAR, argues that the state does not regulate the professional service fees charged by lawyers, accountants, doctors, building contractors, barbers, nail salons or any of the dozens of other regulated professions serving the public.
“Anyone who has ever purchased or leased a vehicle is familiar with the mountain of paperwork required by regulators and finance sources,” he said. “The professional services performed by dealerships save consumers valuable time and spares new and used car buyers the aggravation of getting on the phone or standing in line to complete these necessary administrative tasks.”
“Government mandates that cap doc fees, inevitably, will force dealers to charge higher prices for the cars they sell to cover costs and make a fair return on investment,” Appleton said.
Appleton said one of the benefits of a free market is that consumers can shop around for their best deal. Regulations that require disclosure of doc fees give buyers “ample opportunity to shop around and get the best price on the vehicle they want and on the doc fee they’ll pay,” he said.
Until and unless there are any regulations capping the fees, consumers will be left to negotiate for lower costs when they buy a car.
Before you even start negotiating for a specific vehicle, you can shop around and select a dealer with lower doc fees. Note that two dealerships that sell the same brands could have very different fees.
And get creative. If the dealer refuses to lower the fee, perhaps they would make up the difference with a lower sales price on the car.
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Karin Price Mueller may be reached at KPriceMueller@NJAdvanceMedia.com. Follow her on Twitter at @KPMueller.
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