October 4, 2006 in Business

More car buyers face ‘doc’ shock

Wall Street Journal The Spokesman-Review
 

The cost of purchasing a car is creeping higher as more buyers are hit with a surprise familiar to anyone who has ever bought a house or pored over a phone bill: high processing charges.

States increasingly are passing laws that let car dealers raise the fees they charge for preparing and processing all the paperwork involved in closing a deal on a vehicle, including documents for registration, vehicle titles and license plates.

Paperwork charges can now run as high as $900 in the roughly 30 states without set fees or caps on fees. The fees, often called “doc” or documentary fees, now average $400 to $700 in those states, according to estimates by automobile club AAA, compared with averaging less than $200 five years ago. In some states, the fees also can be subject to sales tax.

A new law in Ohio lets dealers charge as much as $250 for doing the paperwork, up from the previous limit of $100. In California, a bill signed into law last week raises the limit to $55 from $45 for dealers in the state, starting in January. Limits on paperwork-processing fees have also been raised or set in recent years in Michigan, Washington and Maryland, where the doc fee maximum has climbed to $100 from $25. Earlier this year in Florida, where there is no cap, documentary fees rose to $599 from $549 at South Florida outlets of national dealer chain AutoNation Inc., the first increase in five years. Similarly, in Georgia, Mercedes-Benz of Augusta added a doc fee of $599 last year, up from $499. Many dealers in the Las Vegas area charge processing fees of around $400, compared with fees in the area around $200 roughly a decade ago.

Consumers and lawmakers in some cases are fighting the auto fees. Class-action lawsuits are pending in states such as Arkansas and Florida. A number of states from Alaska to New Jersey, meanwhile, have introduced legislation in recent years that challenges, seeks to limit or requires disclosure of such fees.

The higher fees come as major turmoil in the car industry has meant thinner profit margins on new cars for dealers.

Efforts by Detroit auto makers to spur sales by offering deep discounts and making sticker prices closer to the final price of the car have cut into dealer profits. And dealer profits may get even slimmer in coming months as some car makers try to clear out 2006 models from overflowing lots with buying incentives this fall and lower sticker prices on new models.


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