If you have bought a new or used car or truck in the past 10 years then you have most likely paid a Doc fee.  This is an addendum or additional fee assessed by the car dealer supposedly for paperwork, filing and other various items that have to go with your car purchase.  When asked about the so called Doc Fee, most car salespeople and managers will either try and evade the question or state that it covers clerical costs.   So what exactly is the Doc or processing fee and why do car dealers charge it?

Well, first of all, after doing a little research, the Doc or processing fee was actually started as a way of increasing net profit minus commissions for the car dealership.  Its purpose was to add additional profit that the dealer did not have to pay hefty commissions to its sales staff on.  The original Doc fee (or processing fee as it is sometimes referred to) was designed to be small so most customers and staff would swallow it without ever questioning it. 

Most Doc fees originated in the $29 to $59 range and wouldn’t mean much of a difference to customers or sales staff, but it meant a whole lot to the dealer’s bottom line.  Just take an average $40 (average for the early 90’s and definitely not average now) and multiply it by the number of new and used cars the average car dealer sells (according to Used Car News and Manheim Auction – two huge names in auto sales this is around 400 and hasn’t changed much in the past 10 to 15 years).  That would result in a quick pure profit of $16,000.

Now, jump forward about 10 to 15 years to today and you will see the average Doc fee is now $399 (that’s an increase of 1000% in around 10 years) and some car dealers charge upwards of $799 or more.  So, if you do the math on this and multiply the same 400 cars by $399 you get $159,600 per month or $1,915,200 per year.  That’s almost $2,000,000 per year in non commissionable profit!  Now, here’s the real kicker on Doc Fees – they are all pure profit and completely bogus!  That’s right, your local car dealer and probably the GM (General Manager usually gets a cut for keeping all the other staff out of the loop on this) now make almost $2,000,000 per year off their customers and sales staff.  

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Now, you ask, how do they make this off the sales staff?  Easy, When final prices are negotiated and agreed to the sales price can be cut, but the Doc or processing fee will not be.  What that means is that in most sales where price is an issue (which is just about every one except in very rare circumstances) the sales staffs commissionable profit will get cut to make room for the ever important Doc Fee.  So, what was originally designed to add a little extra profit has now become a major profit source for the car dealer.  Now, lets take the math a little further, the average car dealer owns 7 car dealerships. 

So that means that they rake in a total of $14,000,000 in bogus fees every year – and that doesn’t even include any profit on the vehicles themselves which actually averages $1300 on the actual purchase (referred to in the trade as the front end) and $1500 on the finance or back end (from the finance manager whose job is to befriend you and then basically take you to the cleaners with vastly overpriced aftermarket warranties, insurance and complete rip offs like paint protection for $500 - for more on this see our award winning article on car dealer scams).

Now, your dealer will probably tell you that they need Doc Fees to process your paperwork, pay for the finance manager and clerical staff, detail your car, etc…  Well, if you read the small print on the window sticker on new cars right under the listed MSRP (Manufacturers Suggested Retail Price) it clearly states that this and any other B.S. the car dealer tells you is already included in the new car sales price (and in the invoice price too).  The clerical and other stuff is an actual cost of doing business just like any other industry.  Could you imagine if Walmart added just $20 to every purchase for cost of clerical, cleanliness (well Walmart could probably use a hand in this anyway at some locations), billing, etc…  No one would do business there.

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Well, that is exactly what the car dealer is doing every time someone buys a new or used car or truck from them with a Doc Fee attached.  You are actually paying for the car dealer and general managers expensive dinners, exclusive golf and social clubs, medical and dental insurance coverage for all siblings even cousins in many cases, free cars for friends, pastors, ministers, local politicians and business associates, limousine services, expensive DUI attorneys for car dealers and their kids (they tend to get more than their share of DUI’s), expensive trips, expensive cars, Mc Mansions, expensive estates and numerous vacation homes, and even the purchase of more car dealerships so the process can just repeat itself.  The reason why I am telling you all about this is simple – stop making the rich richer at your own expense especially with huge bogus fees that they just figure in to your car payments (the finance manager will gladly factor  the Doc Fee into your payment so you end up paying almost twice as much for it in the end). 

If you find a car dealer charging a ridiculous Doc Fee or processing fee go to another car dealer.  Refuse to pay it and leave if you have to.  Also, call your state representatives and let them know you are unhappy with this legal fleecing of car buyers.  Several states are now considering legislation to either limit or completely ban the bogus Doc or processing fee.  Make sure your state becomes one of these and stop financing your car dealer and his GM’s extravagant lifestyles.  So, why do car dealers charge Doc fees?  Because they are pure profit, easy money, and most importantly, because they can (unless you help put a stop to them)!.