State proposal would hike fees for car purchases and leases
California car dealers could reap as much as $80 million a year from a state legislative proposal that would authorize significant increases in the fees charged for processing auto purchases and lease agreements.
The increases are part of a yet-to-be-written proposal by state Sen. Alex Padilla (D-Pacoima) that would require new-car dealers and allow some used-car dealers to adopt an electronic vehicle registration system that slices the time it takes to get license plates on cars to a few weeks from about three months.
“The electronic vehicle registration proposal is supported by local governments and law enforcement so they can better enforce traffic laws,” said Taryn Kinney, Padilla’s press deputy.
The added fees, $20 to $30 for each purchase or lease, would be aimed at offsetting any additional cost dealers would incur for using the electronic system.
However, the senator’s office declined to provide any other information about the proposal, which people involved in the discussions said was being promoted as a so-called trailer bill to the state budget. That status would allow the proposal to become law without going through a legislative subcommittee and a public hearing.
Consumer groups are protesting the move as a back-door way to give auto dealers millions more in profits. Padilla’s measure would raise the so-called documentation fees to $75 from $55 for new- and used-car purchases and from $45 for car leases.
“This adds up to tens of millions of consumer dollars each year, solely for the benefit of auto dealers, and is being considered without the benefit of a single policy hearing at which the public can express its concern,” said Norma Garcia, a senior attorney with Consumers Union, the nonprofit publisher of Consumer Reports magazine.
The Center for Responsible Lending and the Consumers for Auto Safety and Reliability also oppose the increase. The center said dealers often tell buyers, wrongly, that the government mandates documentation fees.
Others questioned whether it made sense to package the proposal with the state budget bills rather than to offer a stand-alone measure.
“The proposal is unrelated to the state budget,” said Carrie Cornwell, chief consultant to the state Senate Transportation and Housing Committee.
The change to a faster electronic vehicle registration system is supported by local governments and toll authorities that lose millions of dollars annually by being unable to identify traffic violators and toll scofflaws by photographing rear license plates.
The Bay Area Toll Authority, a proponent of the increased fees, said that nearly 700,000 vehicles without license plates crossed San Francisco Bay Area toll bridges last year without paying a toll at a cost to the agency of $2.8 million.
Auto dealers have said they would oppose any electronic vehicle registration proposal that does not allow them to raise documentation fees to pay for increased expenses they said they would incur to comply with the mandate.
“The drive behind this was to get plates on cars faster. We will be glad to participate, but we have to have some way to pay for it,” said Peter Welch, president of the California New Car Dealers Assn.
Dealer expenses would include posting a $50,000 bond and maintaining a secure supply of license plates and tags on hand, Welch said. Employees who handle the plates and stickers must be fingerprinted and trained on how to tap into the electronic vehicle registration system.
He said that public benefits in moving to an electronic registration system include fewer recording errors, a more efficiently run Department of Motor Vehicles and an increase in tolls collected.
The electronic system also speeds registration and allows vendors to maintain an inventory of license plates and registration tags.
Consumer groups are aligned against the proposal because it would raise the documentation fee 67% for leases and 36% for purchases. Dealers are allowed to charge the fee as part of the transaction, though they often tack it on after negotiating the sale price with the buyer.
“Most consumers are not aware that this is actually negotiable, and such an increase would result in taking substantial dollars out of consumers’ wallets and handing them to dealers,” Garcia said.
While savvy buyers can refuse to pay the fee as part of their negotiations, most car purchasers pay the fees because they don’t want to unwind the transaction so late in the process or they believe they can’t avoid the expense. California is one of 14 states that put a cap on the fees.
As many as half of new-car dealers already use the electronic system voluntarily and can charge an additional $29 fee.
Welch said Padilla’s office has yet to release any language for the bill, and the lack of a written proposal has created confusion, Welch and the consumer groups said.
It is expected that new-car dealers that also sell used cars also would have to move to electronic registration for those transactions and would be allowed to charge the higher fees.
Some independent used-car dealers might move to the system, but others probably would not qualify for the security and privacy safeguards that would be required. Those dealers would have to stick to the current documentation fee schedule.
How much dealers would collect from the increase would depend on how the new fees would be enacted.
Based on the current annual level of about 1.2 million new-vehicle sales in California, the proposal could cost new-car buyers about $30 million a year. But used-car sales and the addition of independent retailers to electronic registration could drive the figure to $80 million, according to some estimates.
jerry.hirsch@latimes.com
