One of the biggest tricks in the car business is the “dealer conveyance fee,” which is supposed to compensate the dealership for its costs in processing the paperwork, taking care of the registration, and closing the deal. About 20 years ago, dealer conveyance fees were modest, with most dealerships charging less than $100. But, starting around the late 1990’s, a few dealerships started to charge more. Others followed, and before long, many were charging $299 or more. The dealerships that kept their rates reasonable suffered from unfair competition, because other dealerships advertised cars at lower prices, only to make up the difference by charging a higher conveyance fee. So, more dealerships increased their fees to match their competitors. Soon, other dealerships raised their prices even higher. Today, we have some dealerships charging as much as $799, or about 10X the amount charged by many dealerships as recently as 15 years ago!
Many consumers are surprised when they visit a dealership after seeing a used car advertised for $5,000 only to find out that the price is $10% higher once a $500 dealer conveyance fee is added to the cost. Unfortunately, that is a common story. Consumers will not have much luck trying to negotiate the conveyance fee. These fees are fixed, and dealerships charge everyone the same amount, regardless of their credit or the price of the car. Most dealerships have the conveyance fee pre-printed on their contract forms.
Buyers can avoid the conveyance fee, or at least most of the fee, if they pay cash for the vehicle and if they are willing to take care of registration themselves. But, most consumers need to finance car purchases, and who wants to wait in line at DMV?
Since the consumer cannot negotiate the fee, and few can avoid it, we suggest that consumers protect themselves by learning the amount of the conveyance fee BEFORE they begin to negotiate contract terms. If the fee is $200 or less, we suggest that a consumer simply accept the fee. But, if the fee is much higher than that, we think that some serious negotiations are appropriate. While the dealership will refuse to reduce the fee, the purchase price of the car is negotiable at most dealerships. So, if you’re looking at a used car with a book value of $12,000 and the dealership wants a $500 conveyance fee, tell them that you will pay only $11,700 plus the conveyance fee. If the dealership refuses, tell them that you’ll find another dealership that charges a more reasonable conveyance fee. As with all car negotiations, you will get a much better deal if you do your research and you are prepared to walk away.
If a dealership is charging a an excessive conveyance fee (which, in our opinion, is anything over $300), then a consumer might want to thing about whether they even want to do business with that dealership. High dealer conveyance fees could be a sign that a dealership is unscrupulous. If dealerships try to boost profits by sneaking high conveyance fees into their contracts, then consumers may be right to wonder whether the dealership is playing other games as well
Car dealerships in Connecticut are required to make it easy for a consumer to learn the conveyance fee before they negotiate a price. Dealers are required to either provide consumers with a sheet or to post a sign in a prominent location. We suggest that consumers ask their salesmen for a copy of the sheet or ask to see the sign. If a dealership does not make proper disclosure, then it may be violating the law if it charges a fee that is deemed unreasonable.
For more tips on buying a new or a used vehicle, check out our webinars on How to Buy a New Car and How to Buy A Used Car.