Are You Charging Closing Fees?
Document, procurement, closing fees. There are many names for the common fees that are charged by dealers during vehicle sales. However, while the practice is legal, there are strict requirements that must be met. Are you familiar with your state’s laws on the subject? If not, you could be in for a rude awakening.
Dealerships in Indiana and South Carolina couldn’t provide proof that their closing fees were reflected in their actual cost of closing sales. As a result, they were forced to make repayment totaling millions of dollars to thousands of customers who were ruled to have been unfairly charged.
A dealership in Easley, South Carolina charged a flat closing fee of $299 per vehicle sold, regardless of the precise costs incurred. While their fee was technically legal, when challenged in court the fee was found to be unrelated to actual overhead and thus they were forced to settle the complaint. This resulted in litigation that lasted nine years, and damaged both the dealership’s bottom line, and more importantly, their reputation.
In Indiana, the dealership was found to be charging a fee that they could not prove addressed their actual costs incurred. The dealership did not admit any wrongdoing. But, they agreed to limit future document fees to $200 or less, while entering into an Assurance of Voluntary Compliance.
If your dealership charges document fees, evaluate your process to ensure your fees reflect actual costs. Carefully review your state’s laws when it comes to requirements for closing and document fees. In both of these cases, the dealership’s fees would have stood as long as they accurately reflected the cost of putting together the sale and its documents. A flat fee may seem easier, but in the end it will only bring trouble.