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Buying a Car: What Is a Doc Fee?

If you’re going through the process of buying a car, you may have come across "doc fees," or documentation fees. Dealers sometimes charge this fee in addition to a car’s purchase price, and it can often add several hundred dollars on top of the figure that you and the dealer agreed on. So what exactly is a doc fee? Is it a scam? And do you have to pay it? We have the answers.

What Is a Doc Fee?

A doc fee — also called a document or documentation fee — is a fee charged by car dealerships to process a vehicle’s paperwork. Essentially, a doc fee covers the cost of all the dealership’s back-office employees, from the people who handle the money to the employees who deal with the title, registration and the DMV.

The only problem: Shouldn’t the purchase price cover those costs? After all, if a dealership makes a profit on each car sold, shouldn’t some of that profit go to paying each employee? To many consumers, the idea of an extra charge like this seems fraudulent and unreasonable.

But is it fraudulent? In most cases, the answer is no. Many U.S. states don’t regulate the amount of money that a dealer can charge for a doc fee, though some states do. If you’re in a state that doesn’t regulate the fees, prepare for the dealer to hit you with a bill of several hundred dollars, even after you’ve negotiated the purchase price to a point you’ve mutually agreed on.

Do You Have to Pay It?

So, do you have to pay the doc fee? To us, the answer is yes and no. Some shoppers get so hung up on the doc fee that they forget about the most important part of a car-buying transaction: the bottom line. The bottom-line number includes the purchase price, tax and every single fee you can imagine — and that’s the number you should negotiate.

Here’s what we mean: If you’re prepared to pay a certain amount of money with tax for a car, you should ask the dealer to deal in his bottom-line or out-the-door price — a price that includes the doc fee, if the dealer charges one. That way, you’re not haggling over the exact dollar amount of fees and taxes, which can be disheartening. Instead, you’re focused on the price you pay overall, and if the dealer wants to include a doc fee in that price, then so be it.

For instance, say you have a $30,000 budget and you’re looking at a $28,000 car with a $500 doc fee. Add in a 7-percent sales tax, and this car costs $30,495. In this case, we might tell the dealer that we’d be willing to pay $30,000 out the door. After that, it won’t matter whether the dealer charges the doc fee or not, since you’re only dealing with the total price.

Don’t Get Caught

No matter how you choose to negotiate your price when buying a car, we strongly suggest making sure that all the fees have been mentioned before you sign any papers. Be sure to explicitly ask the salesperson if the price includes all fees, so that he or she can come clean about any extra charges you might see on the final paper work. If a new fee crops up after this, be prepared to walk away and find a different car at a more honest dealership.

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Editor’s Note: This article has been updated for accuracy since it was originally published.

 

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