California Car Buyers Could Pay Up to $500 in Fees at Dealer Under Proposed Bill

State senators passed the bill 29–1 earlier this month, saying it would bring California more in line with other states.

A new vehicle for sale at an auto mall in Ottawa on April 26, 2021. The Canadian Press/Justin Tang

The California Assembly Committee on Transportation is expected to hear a bill that would increase the document processing charge that car buyers must pay when purchasing a new car at a dealer.

State senators passed the bill earlier this month, saying it would bring California more in line with other states.

Under California law, car dealers that have contracts to be a private industry partner with the Department of Motor Vehicles (DMV) can charge up to $85 in document processing fees. All other dealers can charge up to $70.

Senate Bill 791 would change that limit to not more than “1% of the total price of the vehicle” with a maximum charge of $500. The state is exempt from paying this fee when it buys vehicles for its fleets.

California currently has the lowest document processing charge of any state, according to data from CarEdge, a platform dedicated to market insights on vehicles. Some states, such as Florida, do not have a cap on document processing fees.

“It’s about one-fifth the national average. At the same time, California dealers are subject to the most stringent document processing and consumer protection requirements in the country,” state Sen. Dave Cortese, the bill’s author, said at the April 22 Senate Transportation Committee hearing.

California car dealers say the increased fees will help cover the costs of processing paperwork required for car sales, including DMV registration, loan documentation, and fraud protection, among others.

“Many businesses recover their costs by imposing various charges and fees that go by different names—convenience, charge, service charge, appreciation fee,” Anthony Samson, a lobbyist representing the California New Car Dealers Association, said at the committee hearing.

He said SB 791 will allow dealerships to “continue to adjust charges and fees to reflect the cost of doing business” in response to changes in the economy and new policies from the state.

The California New Car Dealers Association, which is a frequent financial donor to state legislators, said it helped sponsor the bill.

However, SB 791 received pushback from other auto industry representatives.

“We see the document fee as a form of junk fee in the respect that it’s non-negotiable. Usually, it’s sprung on consumers at the end of the transaction,” Rosemary Shahan, president of Consumers for Auto Reliability and Safety, said at the hearing. “We also feel that the timing is really bad. We need to do more to make cars more affordable, and this goes in the opposite direction.”

On the state Senate floor on June 3, lawmakers debated the impacts of implementing a higher fee at the car dealer.

State Sen. Kelly Seyarto supported SB 791, saying he doesn’t want “businesses being chased out of the state by our overburdening regulations.”

“This is a perfect example of more and more regulations being heaped on businesses,” Seyarto said. “We pile too many on them. So what do they have to do? They have to pass those costs on to the consumer.”

Other lawmakers also supported the increased fee but said the final number needs adjustment. State Sen. Jerry McNerney said that “the jump to $500 is a little too much,” but he is hopeful that the Assembly will lower the amount.

State Sen. Roger Niello said the bill “directly affects” his private sector family business of running car dealerships and abstained from voting.

SB 791 passed the state Senate in a 29–1 vote, with 10 senators abstaining. It is now waiting to be assigned a hearing date in the Assembly Committee on Transportation.