- Car dealers in California are currently allowed to charge an $85 document fee on each car sale
- A bill expected to pass the state legislature soon would raise that to $500
California car shoppers could be paying a lot more in dealership fees soon.
A bill expected to pass the state assembly soon would permit dealers to charge a “document fee” of up to $500 on the sale of a new car. Document fees are currently capped at $85 in California.
Dealerships often charge a document fee to cover the cost of the labor necessary to complete paperwork on a sale. However, the fees vary widely from state to state.
Industry publication Automotive News explains, “The average document fee in the U.S. is $433, according to the California New Car Dealers Association.”
Related: What Are Destination Charges?
Some states, however, don’t cap the fee. Chris Capurso, an associate at the automotive industry law firm Troutman Pepper Locke, told AN that fees can be higher than $1,000 in some states.
The Federal Government Almost Banned This Fee Recently
- The Federal Trade Commission tried to write rules capping so-called “junk fees” in car sales in 2023
- A federal court struck the rule down on a technicality, and the Trump administration opted not to fix the issue
The Federal Trade Commission (FTC) recently tried to write rules restricting the fees car dealerships could charge. In late 2023, the agency proposed its Combatting Auto Retail Scams (CARS) rules, which would have banned many dealership fees and some dealership marketing practices.
In January, a federal court found that the FTC had not given the industry enough notice that the rules were coming.
The court’s ruling would have allowed the FTC to restart the process. However, the Trump administration declined to do so, letting the proposed junk fee rule die.
Some advocates say states could step in with their own regulations.
A cap like California’s, says Troutman Pepper Locke partner Brooke Conkle, “legitimizes the doc fee and cuts against this idea that it is just a junk fee that has no purpose.”
In contrast, Florida has no regulations on document fees. Ted Smith, president of the Florida Automobile Dealers Association, says that may give consumers more freedom.
“There is nothing that says the consumer cannot negotiate out that dealer fee,” he tells Automotive News. “It is not a mandatory fee to the consumer, but it is mandatory that the dealer disclose it.”
