The 'Dealer Fee' Scam Revealed in South Carolina

Have you ever purchased a new or pre-owned vehicle from a dealer and were preparing to sign the purchase agreement (buyer's order) when you came across a bold section that said 'dealer fees'? If you, so are not alone. Dealer fees are not only legal in most states, but the State of South Carolina is currently considering a bill that will nullify impending lawsuits against dealers for collecting this frivolous fee.

Car dealerships are big business as we have discussed time and again. And, we here at the Car Business Insider are supporters of the automotive business, but firmly believe that dealers are lack integrity are rampant. Thus, our mission is to educated dealers and those employed in the industry as to the pitfalls of low-integrity auto business dealing and to raise the otherwise low barre that seem to persist in the industry.

Car dealerships are also big businesses for cities and states. They collect hundreds of thousands of sales tax dollars for the state and also pay fees applicable to doing business, such as: taxes, disposal fees, environmental fees, etc. So, it isn't difficult to imagine that they also have a big lobby at your statehouse. That is certainly the case in the State of South Carolina as auto dealers are scrambling to convince lawmakers - your lawmakers - to reverse the court's legal position on improperly assessed doc fees.

The following is a Notice of Class Action Settlement levied against a Hendrick Auto Group dealership in North Charleston, SC., specifically Rick Hendrick Jeep Chrysler Dodge Ram:
http://www.noticeclass.com/upload/ClosingFeeSettlement/rick-hendrick-jeep-chrysler-dodge-ram/JeepNotice2.pdf .

The result of the suit amounted to about $1.5M in settlement fees. But, the settlement was only applicable to the complainant's suit and those incidents that preceded his own. It does not account for those who paid the fees post-settlement. The Hendrick Group was hit yet again for $2.8M levied against their Hendrick Honda dealership.

Recently, in Columbia, SC., a bill that would kill some 200+ class action lawsuits against car dealers for these frivolous fees was passed out of the Senate Judiciary Committee, according to The State newspaper. See: http://www.thestate.com/news/business/article55158070.html

The bottom line is this with regards to dealer doc fees:

1) Dealer doc fees are subjectively imposed by dealerships.
2) In South Carolina, there is no cap or rules as to amount for doc fees.
3) Dealer doc fees usually range from $99 - $699.
4) Dealers typically explain the extra charge as a "processing fee" to cover "expenses".

INSIDER TIP: Let me be straight and to the point: DEALER DOC FEES ARE 100% PROFIT!!

I have been in many, many dealer meetings and it is, without dispute or confusion, accurate to infer that doc fees are profit that goes directly to the dealer's bottom line on each sale. Furthermore, and to add insult to injury, I know of NO dealer out there that actually shares a percentage of those passive earnings with his/her staff members. In other words, all doc fees go straight to the dealer.

So, if we translate a dealership that sells 200 units per month with a doc fee of $399.00, that is an additional $79,800.00 for the month's bottom line that is not commissionable and straight profit. Believe me when I tell you that if you are attending a dealership meeting and make any enquiry as to the validity of or the divvying of a doc fee, prepare to be cut off at the ankles. Dealers love their doc fees.

From a legal standpoint, the SC Legislature and the bill's sponsor are likely going to be quickly shut down by attempting to satisfy the dealer lobby. The SC Supreme Court has already ruled in favor of consumers regarding frivolous doc fees, and it is not likely (nor legal) to retroactively nullify pending suits with this type of legislative dodgeball.

More laughable was the remark by a Rick Hendrick General Manager who testified that, “Hendrick failed to offer any evidence that it calculated the costs that comprised the closing fee,” the opinion said. During the trial, Hendrick’s general manager testified he didn’t know how closing fees were computed, the opinion said. http://www.independentmail.com/news/state/sc-supreme-court-rules-against-car-dealership-charging-closing-fees-ep-1352832243-347812751.html

One thing is for certain, folks: every dealership general manager out there knows EXACTLY what the doc fee is and what it constitutes!

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Copyright 2017, Robert Liotti, The Car Business Insider. All Rights Reserved.