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Derrick Woolfson

Derrick Woolfson Business Development Manager

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So What is A Dealer Processing Fee?

At one time or another, we have been asked by a customer "what the dealer processing fee is?" to which most everyone would give a different response. Everything from a fee we charge for DMV paperwork, DMV charge, a charge the dealer has to cover stuff, to name a few. If this question is answered incorrectly, it could land your dealer in hot water. To avoid this happening here some of the things you can do at your dealer to avoid this issue! 

So What isn't Dealer Processing Fee? 

The Dealer Processing fee is NOT for tag and title work, not for reimbursement of pulling the customer's credit scores, and it is also not reimbursement for other costs associated with the deal. 

So then What is the Dealer Processing Fee? 

Simply, it is a fee that your dealership is allowed to charge the customer in relation to services in which your dealership is not otherwise compensated for. 

(reference for the above; MADA)

Other Dealers Do Not have As High of A Dealer Processing Fee, But They Have Maintenance Charge Fees, Appearance Package Fees? 

There are times where I would get calls and the customer asked: "how come your processing fee is more expensive than the other dealer" to which I would (depending on the dealer they were comparing us to) explain that while our processing fee is higher as is the cost of the vehicle. The dealer they are comparing us too has discounted the vehicle to then add "fees" back into the deal (which is a whole other article), but for the purpose of this article instead of charging the same "processing fee," they were simply disguising into another fee, such as an "appearance package, maintenance fee," to name a few. I would not recommend doing that; however, that is something we see dealers doing. 

Educate Your Staff. Explain What the Dealer Processing Fee IS and IS NOT 

Given that there will come a time that your staff is asked to answer "what is the processing fee," you want to make sure that you first explain what the processing fee is not. Thereafter, take the time to explain to the staff how to answer the question. Another thing you can do for the team and customers is to have a brochure that explains the dealer processing fee. This will also help ensure that the same answer is given each time a customer has a question regarding the dealer processing fee. 

The Bottom Line: No one wants to land themselves - or their dealer -  in hot water by not answering the question correctly; or more importantly, miss inform their customers. That said, there are a few things that your dealer can do - as mentioned above - to ensure that your team is always answering the customer's questions regarding the dealer processing fee correctly. In doing so, it will lessen the chances of there being an issue. The other thing you want to be mindful of too is answering the customer's questions with regards to other dealers having less expensive Dealer Processing Fees, to then add "additional" fees to the deal. At the end of the day, it is best to be both honest and transparent to the customer by offering them a good experience.  

How do you handle this question? Is this a question you get often? 

Dan ElDoueihi

Very simple. We don't charge a fee.  I've learned customers hate the sterotypes of a dealership and the best thing to do is be transparent.  Most of my customers keep coming back for future vehicles and refer people they know simply for the fact that our dealership stands out. The price you see online is the price you are going to pay. No hidden fees, no upselling. Just a clean straightforward sales process that keeps the customer happy.  Short term profits take a hit, but long term works out better.

Derrick Woolfson

@Dan, wow - that is awesome, and as you mentioned - the customer certainly appreciates an experience where they do not have to worry about hidden fees. And while it might be a short-term profit hit, I imagine that because it is straight-forward, the customer might be more willing/interested in adding additional items to the vehicle; such as a warranty, service contract or accessories, too. 

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