California car dealerships’ awareness of the fees they can legally charge their customers is important in order to stay compliant with applicable state and federal regulations. Depending on the type of car dealership, certain fees may be permissible or prohibited. In addition, car dealerships should make sure that all charges are clearly itemized and described in writing on the car sale agreement.
Some of the common legal fees car dealerships may choose to add to car sales contracts include:
- Document preparation fees, which are typically charged for the paperwork associated with car purchases or car loans.
- Title, registration, and Vehicle License Fees (VLF) to cover the cost of transferring ownership rights from car dealerships to customers.
- The California Tire Fee (CTF) that helps fund California’s tire recycling program and is applied to car purchases, if applicable.
- Electronic filing charges, which are associated with the electronic transmission of car titles, registration, loan documents, or other car-buying paperwork to state agencies.
- Smog certification fees to provide customers with certificates that verify the car meets all state standards for emissions control, if applicable.
- Optional accessories and services, such as Service Contracts and GAP insurance, must be optional (not required) and must have a reasonable (not excessive) fee associated with them. The fees should be clearly stated in the car dealership’s sales agreement so that customers understand and agree what they are paying for.
Additional arbitrary fees, like an “Inflation Fee”, “COVID fee”, or “Dealer Fee” are not allowed under California law. Also, consumer lawyers have sued dealers claiming that dealers cannot charge an additional fee for using a credit card (for example, a 3% fee for using a credit card to pay for the consumer’s down payment).
Being transparent when adding these legal fees to car sales contracts helps to avoid potential disputes or misunderstandings with customers. Also, using a strong disclosure and compliance software could minimize possible risks.
