Car dealers have no limit on what they can charge customers to process paperwork on a new car sale, the state’s Supreme Court has ruled.
The ruling stems from a lawsuit brought by Dyvon Small, a Hartford resident who in 2002, purchased a year-old Chrysler 300M from then-named Manchester Chrysler, and was upset after paying a $299 “dealer conveyance fee.”
Dealers collect conveyance fees from customers to cover the paperwork costs of submitting registration and title information to the state’s registry. The legislature has authorized dealers to collect “reasonable” fees since 1998. At that time, fees hovered around $50 or less. Nearly 10 years later, as technology has lowered the cost of what dealers used to pay for out of pocket, it is common to find fees as high as $500 or more.
The trend of growing fees is not isolated to Connecticut. Although no formal statistics exist on the fees, also known as documentation fees, anecdotal newspaper reports from around the country list fees high as $1,000. And as those fees have risen elsewhere, a number of states have capped them. In some areas, class action lawsuits are pending against dealers for ultra-high fees.
“It’s just another place to make a profit,” said Remar Sutton, a long-time consumer advocate and author of “Don’t Get Taken Every Time.” Sutton estimates that the cost of processing a registration is probably no more than $10 to $20, meaning conveyance fees net hundreds of dollars in extra cash for dealers.
Dealer Entitlement
But Gary Reynolds, a Lyme Subaru dealer who sits on the board of the National Automobile Dealer’s Association, said that “dealers are entitled to a conveyance fee” that is reasonable, the definition of which “depends upon the cost structure of a dealership.”
“What is fair and reasonable to me may not be to someone else,” Reynolds said. “We are all independent business owners and free to make our own decisions of what is justifiable… Outrageous fees aren’t good for the industry or for anyone, but I can’t define outrageous without knowing a dealer’s cost structure.”
However, neither Sutton nor Reynolds favors legislative caps on fees. Sutton said consumer education is the best solution to ensure fees don’t grow. Reynolds said the market weeds out or otherwise prevents dealers from charging too high fees.
Not so, said Small’s lawyer, Daniel Blinn of the Consumer Law Center in Rocky Hill. Since conveyance fees aren’t advertised, dealers can play a sort of shell game with customers: offering lower prices, only to jack up conveyance fees on the purchase and sale agreement.
“The court’s decision essentially gives dealerships carte blanche to lure consumers to their showrooms by advertising deceptively low prices only to charge them with a huge fees,” Blinn said.
“It’s a bad decision for consumers,” Blinn said.
Wrong, said the dealership’s lawyer, John Farley, of Halloran & Sage in Hartford.
“It’s the right decision. The legislature did not intend to regulate the amount dealers can charge. And that’s what the court held,” Farley said.
