Most automotive dealers that write auto loans charge something called an administrative fee that ranges anywhere from $100 to $800 depending upon the area and dealership. This generic term sometimes makes it confusing for buyers to understand exactly what their money is paying for; read on to get a better sense of what this fee is.
What is an Administrative Fee?
An administrative fee is something that dealers often charge. In some cases, administrative fees are simply ways for the dealership to make additional money on approved auto loans or the sale of a vehicle. In other cases, however, the administrative fees are charged by the manufacturers. The dealers are required to pay the manufacturers this fee so the dealers then charge the buyers the same amount in order to pay the fee.
What Does an Administrative Fee Cover?
An administrative fee covers a variety of different things dependent upon the dealership and the manufacturer. Sometimes, dealers will use the administrative fees as part of their regular budget going to things like business costs, salaries, bonuses, etc. The majority of the time, though, the administrative fee simply goes directly back to the manufacturer to cover costs of vehicle production.
Should You Be Paying for an Administrative Fee?
Take the following steps to ensure that you are paying for a legitimate fee.
- Ask to see the factory invoice.
- Check to make sure the invoice matches the VIN number on the vehicle.
- If there is a line for an administrative fee then you need to pay it because this means that the manufacturer is charging it.
- If there is not a line for an administrative fee then you should not need to pay for it. Ask the dealer for details regarding this fee.