Dealer Conveyance Fees Charged by New and Used Car Dealers ...

Dealer Conveyance Fees Charged by New and Used Car Dealers in

Connecticut and Related Information

Report to Transportation Committee Required by Public Act 15-5, Section 428

(June Special Session)

January 15, 2016

By Legislative Program Review and Investigations Committee

Connecticut General Assembly State Capitol Room 506 Hartford, CT 06106

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Highlights of Dealer Conveyance Fee Report

? Section 428 of PA 15-5 JSS required this report by the Legislative Program Review and Investigations Committee (PRI), in addition to requiring new and used car dealers to submit dealer conveyance fee information to the legislature via PRI on a one-time basis by November 1, 2015.

? Most new and used license holders provided information for this survey. o The survey response rate for licensed new and used car dealers was 87% and 76%, respectively, with an overall response rate of 78%.

? Dealers selling new cars charge a higher dealer conveyance fee than dealers selling used cars or other motor vehicles (e.g., motorcycles, RVs). The average dealer conveyance fee for dealers selling: o new cars was $405 (range of $0 to $699); o used cars was $131 (range of $0 to $695); and o other motor vehicles, $119 (range of $0 to $499).

? Over 80% of new car dealers charge over $300, and over 70% of used car dealers charge under $199.

? No dealer conveyance fee is charged by 47% of used car dealers, 45% of other motor vehicles, and just 5% of new car dealers.

? For most dealers, there was little variability from month to month in the average dealer conveyance fee paid by customers from October 2014 through September 2015. o Dealers who commented on reasons for month-to-month fee variability largely said it was because they: increased fees during the period (30%), discounted the fee when customers registered the vehicle (25%), or negotiated with customers (11%).

? When the average dealer conveyance fee was compared among dealers by county, the fees did not vary significantly by counties.

? The dealer conveyance fee law requires dealers who charge a fee to reduce that fee by a proportional amount when the buyer elects, "as appropriate," to submit documentation to DMV to register and transfer ownership of a vehicle. o The average amount deducted by new car dealers was $58 (average of 14% of dealer conveyance fee). o The average amount for used car dealers was higher at $91 (average of 40% of dealer conveyance fee).

? When dealers were asked how the fee was calculated, the most frequent responses were: o an itemization of activities or supplies that were used to calculate the fee (36%), such as, paperwork, wait in DMV line, gas, salaries, and emissions; o costs divided by the number of vehicles sold (24%); and o based on competitors' prices (11%).

Dealer Conveyance Fee Report by Program Review and Investigations Committee Per PA 15-5 JSS: 1/15/16

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Dealer Conveyance Fees: PA 15-5 (JSS) Report

Introduction

The term "dealer conveyance or processing fee" refers to a fee that may be charged by new and used car dealers as part of the ultimate selling price of a motor vehicle, and is defined in Connecticut statute to mean:

"...a fee charged by a dealer to recover reasonable costs for processing all documentation and performing services related to the closing of a sale, including, but not limited to, the registration and transfer of ownership of the motor vehicle which is the subject of the sale." 1

Interest was sparked in dealer conveyance fees during the 2015 regular session by legislation filed to establish a fee cap of $75. The cap concept did not survive, although other consumer-focused amendments to the dealer conveyance fee statutes were contemplated and passed the Senate. The House took no action before the regular session ended. During the June Special Session (JSS) held on June 29, 2015, the dealer conveyance fee topic arose again in Public Act 15-5 JSS, in Sections 426, 427, and 428 identical to what passed the Senate a few weeks earlier.

This report was required by Section 428, which mandated the collection and reporting of certain actual dealer conveyance fee information. Figure 1 summarizes the three subsections of Section 428.

It is important to be aware that while PA 15-5 sought actual dealer conveyance fee data at a point in time via Section 428, the two other fee-related sections made a number of substantive proconsumer changes to the dealer conveyance fee law going forward, effective July 1, 2015. These changes include allowing the fee to be negotiable and requiring any dealer advertisement about the price of a car to include separately the amount of the dealer conveyance fee.

Report Content

The dealer conveyance fee data collection results are provided next in summary form, followed by five appendices. Appendix A contains the actual text of Section 428 of PA 15-5 JSS. Appendix B provides a legislative history of the dealer conveyance fee. Appendix C describes the report methodology used to collect and report fee information. Appendix D contains a copy of the dealer conveyance fee survey sent to all licensed new and used car dealers. Finally, Appendix E lists individual dealer conveyance fee information reported to be posted on September 1, 2015, by each responding dealer.

1 C.G.S. Sec. 14-62(a)(9)

Dealer Conveyance Fee Report by Legislative Program Review and Investigations Committee Per PA 15-5 JSS: 1/15/16 1

Figure 1. Summary of Section 428 of Public Act 15-52 (June Special Session) Re: Dealer Conveyance Fee Data

a. Car Dealer Reporting Requirement - By November 1, 2015, each new and used car dealer licensed in Connecticut, continuously in business for the 12 month period between October 1, 2014 to September 30, 2015, was required to provide the Legislative Program Review and Investigations Committee the following information: 1. the average amount charged by each dealer as a dealer conveyance fee or processing fee in each month between October 1, 2014 to September 30, 2015; 2. a description of how such fee was calculated, and the reason for any month-to-month variations in such fee; and 3. the name and address of the dealer and whether such dealer is a new car dealer, a used car dealer or both.

b. Program Review Committee Facilitation - The Legislative Program Review and Investigations Committee was required to facilitate the submission of information described above by: 1. publicizing the requirements of Section 428 of P.A. 15-5; 2. developing and distributing a form for such submission (except there was no requirement for dealers to use the form, but if the form was not used, the dealer still had to submitted the required information above); 3. allowing such submission either by mail or electronic mail; and 4. taking any follow-up steps necessary to ensure complete and accurate reporting of such information.

c. Program Review Committee Report - By January 15, 2016, the Legislative Program Review and Investigations Committee was required to report to the Transportation Committee. - The report was required to be a compilation of the information submitted pursuant to Section 428 and to include a description of the methodology used to collect and report such information.

2 P.A. 15-5 JSS An Act Implementing Provisions of the State Budget for the Biennium Ending June 30, 2017, Concerning General Government, Education, Health and Human Services and Bonds of the State.

Dealer Conveyance Fee Report by Legislative Program Review and Investigations Committee Per PA 15-5 JSS: 1/15/16 2

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