What is the agency documentation fee and should you pay it?
This is part of Glossary of terms for car buyers series breaks down all the terms you need to know if you buy a new one or old car from one authorized dealer.
Timing is everything, when it comes to buy car, the agency document fee is like a late guest who suddenly arrives while you’re saying your final goodbyes and putting leftovers in the fridge. To put it mildly, they are an annoying but common part of most car deals. However, for car buyers who don’t expect them, they can seem like a blatant scam.
What exactly is the document fee?
First, let’s explain the wording, as document fees can have many different names. These are sometimes called processing or paperwork fees, or they may simply be referred to as “documentation fees”. Regardless of the label, they mean the same thing.
This fee covers the office work a dealer does with any auto purchase. Essentially, you’re paying for the paperwork. This may include vehicle registration, license plates, a check barter value, which ensures a certain trade-off is not affected by rememberand other administrative functions included with the purchase or lease car.
While they sound legit, these fees have a bad habit of showing up at the end of a transaction, which is essentially the worst time that can happen. Usually ranging from $100 to $400, these seemingly unreasonable fees make many car buyers think they are being scammed at the last moment.
So do you have to pay for these fees in the first place?
The short answer is yes. The additional bad news is that the vast majority of states do not mandate a document fee. Some do and limit these fees, so be sure to ask about this. If not, an agent is left to determine what is appropriate, and then passes this cost on to the consumer. After all, no one is forcing you buy car from this particular dealer. Perhaps you can find an agent for less exorbitant fees. But there’s an end-to-end documentation fee that savvy car buyers, like you, can take advantage of.
First, now that you’ve read this sage advice and are prepared to view a final sales contract documentation fee, you shouldn’t be caught off guard. And more importantly, the only thing that really matters is the bottom line: the price includes all fees, taxes, and surcharges. If you’re prepared for the documentation fee to add a few hundred dollars to the bottom line, you can include that in your bargaining strategy. It really doesn’t matter if a particular fee seems unreasonable if you’ve negotiated a fair final price.
How do I know all fees and taxes will add up to the bottom line?
It’s not easy to calculate how all these fees and taxes will go from home to penny, but you can get an idea of what you can expect. Tax is calculate as a percentage of the sales price. Registration fees may be charged by weight. Too much to go into this article, but you can call or talk to seller where the vehicle you are interested in, and inquire about possible fees using the vehicle’s MSRP as a starting point. There is no good reason why an agent would refuse to run those numbers for you.
And remember, you can negotiate on more than just raw dollar figures. If the dealer doesn’t budge on price or negotiable fees, try to buy an accessory or option. After all, why spend all your energy researching cars and comparing costs, only to have a few hundred dollars drive you crazy when the deal is on the closing line?