After all these years and much debate, Doc Fees are still a hot issue. From the mid 1990s through today, the arguments never seem to go away. Substitute the other names it’s sometimes called (administrative fee, D&H, etc.) and you could really get confused.
It gets more complicated with new vehicle sales to manufacturers’ employees, suppliers, and other associated discounted sales. Some earlier guidelines were vague and did not contain strong language, so in recent years some OEMs changed their position and revised their Doc Fee rules with clearer verbiage.
The issues evolve around whether or not Doc Fees are allowed on discounted employees/suppliers sales and the maximum amount that can be charged. The rules are as different as the manufacturers; some of the various guidelines are:
- Permitted to assess a maximum of $75 unless a higher amount is specified by law and all customers are charged the same amount.
- Can charge a fee up to $75 if customarily charged and allowed by state/local law.
- Can charge a separate reasonable and customary fee for document preparation or administrative services.
- Permitted to assess a fee up to $75 for OEM employees/retirees and up to $100 for suppliers, partners, and dealership employees.
Some manufacturers have drawn the “line in the sand” around where the state laws are. Apparently, as of this year, there are eleven states that have specific Doc Fee laws on their books—laws with specific stated (higher) Doc Fee amounts or maximums, not ordinances, disclaimers, or safe harbors. Then there are three states with capped Doc Fee amounts at or below $75 (CA, MN, NY). In addition, some state laws require that dealerships display signage visible to customers stating their practice of charging Doc Fees and the specific amount. After all, dealers argue that there are real costs associated with handling/filing each deal’s paperwork.
But here’s where dealerships get “tripped up”—aside from not knowing current OEM program rules, what they thought was a state law was not. Therefore, it ended up costing them thousand of dollars in chargebacks or issuance of refund checks to customers as the result of a sales audit. So double-check your state law, then your OEM’s incentives manual and program guidelines, to ensure that your Doc Fees are correct and not in violation of any employees/suppliers purchase discount program rules. It would be well worth your time.
OEM sales auditors are auditing Doc Fees heavily, debiting incentives (dealer allowances, employee related bonus cash, and special employee incentives) and fining dealers a flat penalty for violations of excessive amounts. But with some auditors, consistent treatment of Doc Fees on all sales (retail and discounted employees/suppliers) can be the determining factor of whether or not to debit a dealer. Perfect on every deal, that can be difficult to do; but not a good thing to gamble or press your luck on.
One thing is for sure: the OEMs have always advised dealers that they are responsible for complying with their applicable state laws and regulations. It’s just often awkward to satisfy both of them.
Sherralyn Peterson, automotive incentive specialist, with 30 years of automotive experience, helps dealerships prepare for sales audits, conducts compliance reviews, reconciles receivable schedules, performs staff training, and resolves incentives issues. For more information, call 312-310-8380, email [email protected], or visit www.sherralynpeterson.com.