Motor Vehicle Dealer Conveyance Fees

Motor Vehicle Dealer Conveyance Fees

By: Kristen Miller, Senior Legislative Attorney May 17, 2018 | 2018-R-0063

Issues

What are motor vehicle dealer conveyance fees? What are a dealer's obligations related to these fees in Connecticut? On average, how much is the conveyance fee dealers charge? What factors do dealers consider when calculating the fee?

Summary

Connecticut law allows motor vehicle dealers to charge a reasonable conveyance or processing fee

("conveyance fee") to process documents and provide services related to a vehicle's sale, including

vehicle registration or title transfer requirements. By law, conveyance fees are negotiable. Dealers

must inform buyers of, among other things, the amount

of any conveyance fee, the services provided for the

Related Law ? Advertisements

fee, and the fact that it is not payable to the state.

State law also requires motor vehicle dealers to disclose the amount of any conveyance fee in advertisements that provide an advertised vehicle price (see Related Law-Advertisements in the box, at right).

By law, motor vehicle advertisements must include a statement that the advertised price excludes any state or local tax, registration fees, or dealer conveyance or processing fee. There must also be a separate, clearly identified listing of the conveyance fee amount.

A study completed in 2016 by the legislature's former Program Review and Investigations (PRI) Committee reported that motor vehicle conveyance fees ranged from $0 to $699. New motor vehicle dealers charged an average of $405 and used motor vehicle dealers

A violation of this requirement is punishable by a fine of up to $1,000, and the motor vehicles commissioner may suspend or revoke the dealer's

license (CGS ? 14-62a).

cga.olr OLRequest@cga.

Connecticut General Assembly Office of Legislative Research Stephanie A. D'Ambrose, Director

(860) 240-8400 Room 5300

Legislative Office Building

charged an average of $131. The dealers reported several factors that influence a conveyance fee's amount. The most common factors were administrative costs (i.e., personnel and equipment) related to preparing and submitting a vehicle's registration and title documents to the Department of Motor Vehicles (DMV).

Conveyance Fee Law

Connecticut law sets conditions under which a motor vehicle dealer may charge a conveyance fee to recover reasonable costs for (1) processing all documentation and (2) performing services related to the closing of a sale, such as the vehicle's registration and transfer of ownership. The law does not define "reasonable costs" or cap the fees (CGS ? 14-62(a)).

Under the law, dealers must notify prospective buyers that the fee is negotiable and include the fee amount, separately stated, when providing the motor vehicle sale price. The fee may not be added to the selling price at the time the buyer signs the order (CGS ? 14-62(b)).

The law also requires dealers to provide a written notice to buyers specifying the following information:

1. the amount of the conveyance fee;

2. the services the dealer provides for the fee;

3. that the fee is negotiable;

4. that the fee is not payable to the state; and

5. that the buyer may choose, if appropriate, to submit the required registration and ownership transfer documentation to the DMV commissioner (if the buyer chooses to do so, the dealer must reduce the conveyance fee proportionally).

A sign containing the same information must be prominently displayed in the sales negotiation area of a dealer's business (CGS ? 14-62(c)).

The conveyance fee amount and a statement that the fee is not payable to the state must be provided on the face of both the order evidencing the sale and invoice provided upon the vehicle's delivery (CGS ? 14-62(a)).

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Legislative Study

Study's Charge

In 2016, the legislature's former PRI Committee reported the results of a study on dealer conveyance fees. The study was required under Public Act (PA) 15-5, June Special Session (JSS) (see ? 428), which required PRI to compile information from new and used car dealers on (1) the average amount charged as a dealer conveyance fee each month from October 2014 through September 2015, (2) how the fee was calculated, and (3) if there were variances in the fees, why that was the case.

Under ? 428 of PA 15-5, JSS, each new or used motor vehicle dealer that was continually in business from October 1, 2014 to September 30, 2015 had to provide PRI with information about any conveyance fee they charged. PRI sent the dealers a survey form to provide this information and 78% responded.

Study Results

Fee Amount. Of the responding dealers, more than 80% of new motor vehicle dealers (i.e., dealers selling both new and used vehicles) reported charging a conveyance fee of greater than $300. More than 70% of used motor vehicle dealers (i.e., those selling only used vehicles) reported charging fees of less than $199, with almost half charging no fee or not disclosing an amount. And 75% of other motor vehicle dealers (i.e., those selling such vehicles as motorcycles or RVs) charged a fee of less than $199, with 45% not charging a fee.

For all new motor vehicle dealers, the fees ranged from $0 (or no amount disclosed) to $699, with $405 the average (the range among dealers who assessed a fee was $50 to $699, with an average of $425).

The fees charged by all used motor vehicle dealers ranged from $0 (or no amount disclosed) to $695, with an average of $131 (the range among dealers who assessed a fee was $10 to $695, averaging $246).

And dealers of other vehicles charged fees ranging from $0 (or no amount disclosed) to $499, with $119 being the average fee charged.

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PRI found that most dealers reported the same fee amount for each month of the study period. Some of the reasons dealers provided for variation were that the fee increased during the time period covered by the study, the purchaser received a discount for registering the vehicle on their own (as required by law, see above), or the purchaser negotiated the fee.

Fee Calculation. As part of PRI's study, dealers were asked to select from a list of 18 factors the ones they used to calculate their dealer conveyance fee, and write in any additional factors.

Of the new and used motor vehicle dealers who responded, the most commonly reported factors were personnel and office equipment costs related to preparing and submitting a vehicle registration and preparing and submitting title documents to DMV. New motor vehicle dealers also reported, as factors used to calculate the fee, (1) personnel costs to prepare and submit finance and lease documents and file and release security liens on purchased and traded vehicles, (2) office equipment costs to file and release the security liens, and (3) sales associate training on the fees.

According to PRI's report, many of the write-in responses included a number of the above-listed factors (e.g., paperwork or registration costs). Some of the other responses included the costs of fulfilling the DMV registration process (e.g., standing in line, safety inspections, and vehicle identification number verification), purchasing office supplies and software, delivery fees, and telephone calls.

Of the dealers who explained how they used the above factors to calculate their conveyance fee, the most common explanations were (1) itemizing costs, (2) dividing the cost related to registering all vehicles sold divided by the number sold, and (3) comparing the fees of nearby competitors.

KLM:bs

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