What is Doc Fee on New Car? Is it a Dealer Fraud?

Howdy, Driver? When you go to buy a car, you may come across the doc fee. what is doc fee on new car? Well, this research discloses what doc fee means, how each state regulates doc fee, and whether it is negotiable.

A dealer may add the doc fee to the purchase price of a vehicle and it costs anything between $0-$800 depending on the dealership and the state’s regulation.

In some states, doc fees are not capped, such that a dealer can charge whatever amount is desirable and various dealerships charge for doc fees differently. In states with capped or regulated doc fees, however, a dealer must not charge more than the regulated amount, otherwise, it is an auto fraud.

Moreover, state laws do not mandate dealers to disclose the doc fee to buyers, but the buyer must be aware of the fee after they agree to purchase the vehicle and sign the contract.

What is Doc Fee on a New Car?

Doc fee is also called dealer documentation fee or service and handling fee and it is charged by a dealership to process the paperwork related to the vehicle.

Typically, a documentation fee covers the entire titling and registration with the DMV. It is the money that a dealer pays to the responsible staff to handle the entire registration process.

The problem consumers have with the doc fee is that it is charged separately during the purchase of the vehicle, and they feel it should be part of the purchase price. Some consumers think it is somehow one of the fraudulent charges by dealerships such as the prep fee while uninformed consumers never question the fee, believing it is mandatory and non-negotiable.

Is Doc Fee a Scam?

Traditionally, doc fee is not a scam, but it is worrisome when a dealer charges excessively, especially in states without regulated doc fees. It becomes a packed payment scam if the dealer does not disclose it to the buyer.

Consumers think the doc fee is part of the vehicle purchase price already. Well, it is a fee charged separately, and it would be fraudulent for a dealer to charge you for documentation without disclosing it. If a dealer merges the doc fee in the vehicle purchase price, the price will inflate without explanations.

Do fee is not a scam and many states do not even regulate the doc fee. Thus, dealers can charge the fee without a mandate in such states. However, they are expected to inform the buyer before signing the purchase agreement. Also, the mere fact that some states cap the doc fee shows that it is legitimate.

Dealer Documentation Fee According to State

For the sake of accuracy and authoritative information, I have researched how each state regulates the dealer doc fee.

Note: The states are listed alphabetically. Scroll down the list to see the doc fee applicable in your state.

Below is the dealer doc fee by state:

Alabama:

$0 to $458. Alabama does not Cap doc fee.

Alaska:

0$ to $458. Alaska does not cap doc fee.

Arizona:

$199 to $539. Arizona does not cap doc fee.

Arkansas:

$0 to $129. Arkansas caps doc fee (it is called service and handling fees).

California:

California charges an $80 doc fee (dealers participating in the Business Partner Automation) and $65 (dealers not participating). California caps doc fee.

Colorado:

Colorado does not cap doc fee.

Connecticut:

$0 to $699. Connecticut does not cap doc fee.

Delaware:

According to Delaware.gov, the doc fee is 4.25% of NADA book value or vehicle purchase price. No doc fee cap for Delaware.

Florida:

$0 to $607. Florida does not cap doc fee.

Georgia:

$0 to $700. Georgia does not cap doc fee.

Hawaii:

$0 to $250. Hawaii does not cap doc fee.

Idaho:

$0 to $265. Idaho does not cap doc fee.

Illinois:

Yes, Illinois caps doc fee at $300.

Indiana:

According to Autonews.com, Indiana caps doc fee at $199.

Iowa:

According to Iowa.gov, the doc fee is $180. Iowa caps doc fee.

Kansas:

$0 to $285. Kansas does not cap doc fee.

Kentucky:

$0 to $315. Kentucky does not cap doc fee. It is also called a processing fee.

Louisiana:

Louisiana caps doc fee at $200.

Maine:

$99.95 to $599.95. Maine does not cap doc fee.

Maryland:

Maryland caps doc fee at $500 starting from $300. It is called a dealer processing charge.

Massachusetts:

According to blog.mass.gov, the doc fee ranges from $30 to $599. Massachusetts does not cap doc fee.

Michigan:

Michigan caps doc fee at 5% of vehicle price or $160, whichever is lesser.

Minnesota:

According to mada.org, Minnesota caps doc fee at $100 (the maximum fee may increase to $125).

Mississippi:

Mississippi caps doc fee at $425.

Missouri:

Missouri charges an average of $200 for the doc fee. Missouri does not cap doc fee.

Montana:

Montana does not cap doc fee.

Nebraska:

Nebraska does not cap doc fee. The average doc fee in Nebraska is $280.

Nevada:

Nevada does not cap doc fee. The average doc fee in Nevada is $440.

New Hampshire:

New Hampshire mandates the doc fee of $27. However, dealers can charge additional processing fees, thus, it is not capped.

New Jersey:

New Jersey does not cap doc fee and the average fee is $335.

New Mexico:

New Mexico does not cap doc fees and the average doc fee is $330.

New York:

The New York doc fee is $75 capped.

North Carolina:

North Carolina does not cap doc fee. The average doc fee in North Carolina is $550.

North Dakota:

North Dakota does not cap doc fee. The average doc fee in North Dakota is $175.

Ohio:

Ohio caps doc fee at $250 or 10% of the total vehicle price.

Oklahoma:

Oklahoma does not cap doc fee. The average doc fee in Oklahoma is $299.

Oregon:

In Oregon, a buyer can negotiate the document processing fee but it must not exceed $150 (if the dealer uses an integrator) or $115 (if the dealer does not use an integrator). Oregon doc fee is capped.

Pennsylvania:

Doc fee in Pennsylvania is negotiable and not taxable. Pennsylvania documentary fee is $118 (for manual title work) and $141 (if the documentation is done online).

Rhode Island:

The doc fee in Rhode Island is $400. Doc fee is capped in Rhode Island.

South Carolina:

South Carolina does not cap doc fee. The average doc fee in South Carolina is $306.

South Dakota:

South Dakota does not cap doc fee. The average doc fee in South Dakota is $115.

Tennessee:

Tennessee does not cap doc fee. The average doc fee in Tennessee is $495.

Texas:

A dealer in Texas may not charge a documentation fee above $150. Texas doc fee is capped.

Utah:

Utah does not cap the doc fee. The average doc fee is $149 in Utah.

Vermont:

Vermont does not cap doc fee. The average doc fee is $145 in Vermont.

Virginia:

According to the Virginia Department of Motor Vehicles, the processing fee, also called doc fee, must not exceed $250. Virginia doc fee is capped.

Washington:

the doc fee in Washington is $150. Washington caps the doc fee.

West Virginia:

West Virginia caps the doc fee at $175.

Wisconsin:

Wisconsin does not cap doc fee. The average doc fee in Wisconsin is $152.

Wyoming:

Wyoming does not cap the doc fee. The average doc fee in Wyoming is $495.

Following this stat, the state with the lowest capped doc fee is New York at $75.

About 19 states cap doc fees. The states that cap doc fee includes Arkansas, California, Illinois, Indiana, Iowa, Louisiana, Maryland, Michigan, Minnesota, Mississippi, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Virginia, Washington, and West Virginia.

Do You Have to Pay Doc Dees When Buying a Car?

Yes, you have to pay the doc fee, although you can still negotiate or get out of the doc fee completely. If you want to beat the car dealer, do not forget to use the bottom-line price also called out the door price.

The bottom-line includes the purchase price, pre-delivery fee, etc. and you should negotiate on them as well. What it means is that you request the dealer to use their bottom-line price before tax to negotiate with you. Most of the time, the bottom-line price includes the doc fee, which you should not pay again.

Let’s have a brief illustration. The bottom-line price of a vehicle is $25,000 with a 7% sales tax and a $400 doc fee, the price is $27,150. You can tell the dealer that you would be paying $27,000. You have agreed to pay the doc fee, but at a low-cost, which is left for the dealer to decide.

When you negotiate using the bottom-line price, you do not have to negotiate the doc fee separately. Of course, it becomes part of the vehicle purchase price. Nevertheless, the dealer may refuse to negotiate with their bottom-line price.

How to Avoid Paying Doc Fee

To save more money on the car, you would want to avoid paying the doc fee.

Below are the ways to get out of doc fee:

1. Request Doc Fee Removal

You can request the finance department of the dealership to remove the doc fee. If they will hesitate, you may walk out of the deal, but leave your phone number with the salesman, they will call back if the difference is small.

2. Use Out the Door Price

The out the door price may include the doc fee, which you should confirm on the MSRP sticker. Otherwise, request the dealer to negotiate the vehicle price using their bottom-line price.

3. Buy from Cheap Doc Fee State

During my findings, as you see in the article, the state with the least capped doc fee is New York. You can buy the car from any of the states with the least capped doc fee.

4. Buy from Doc-Fee-Free Dealership

The doc fee is not charged in all dealerships. Look out for the dealership that does not charge the doc fee and save some cash after buying the car.

The Dealer Doc Fee is Outrageous: What You Can Do

First, note that the state does not decide what a dealer charges for documentation, except that the doc fee is capped in some states. If you feel the dealer is charging excessively, consider walking out of the deal and buy from any state with capped a regulated doc fee. A dealership in a state that regulates the doc fee will not charge above the limit to avoid legal sanctions.

If you are determined to buy from a state that does not regulate documentation charges, focus on the final cost of the car instead of the additional back end service/product fees.

Are doc fees negotiable?

Yes and No. yes, if your state does not regulate the doc fee. No, if your state caps the doc fee. If your state caps the doc fee, dealers are expected to charge a uniform fee. However, you can request the dealer to discount the vehicle price further to even out the documentation charge.

Is doc fee taxable?

Yes and no, the doc fee is taxable in some states. The doc fee is a charge for the preparation and handling of the sale documents and it must be added to the vehicle purchase price whether the vehicle is financed or not, thus, it is taxable in some states. Moreover, dealerships are expected to pay taxes on every revenue received. However, if charges are stated separately, it may not be subject to tax depending on the state.

Does doc fee apply to used and new vehicles?

Yes, doc fees apply to both used and new cars. A doc fee is legit and recognized in all the states. Every dealer charges for documentation as long as the back-office staff will carry out the titling and registration on the vehicle.