Posted Saturday, Apr 21, 2018
What is a Bank Fee, and do I have to pay it?
Are you working with a car dealership and they mentioned a bank fee? Here is a quick understanding of what they’re talking about.
There are two different types of bank fees you will typically hear about when car shopping. The first bank fee, sometimes called an acquisition fee, is on a lease. The second type is a bank fee paid for the purpose of securing financing on a purchase.
To address the first, on a lease, if your question is “Do I have to pay it?” In short, the answer is generally “yes”. You will generally have to pay the acquisition fee to initiate the lease. The exception being if there is a special program by the leasing company to waive that fee. The upside of a lease acquisition fee is you generally get some value for the cost of this fee. Depending on the leasing company, some provide GAP protection, a certain amount of damage forgiveness at the end of your lease, or more. We recommend asking the finance manager for a full disclosure of any fees on your lease before signing.
What we’re going to focus today though is a bank fee applied for the purpose of securing a loan on a vehicle purchase. The basics of how this fee works, is that it’s a payment made upfront, from the dealer to the lender. This payment is designed to basically provide the bank some guaranteed profit at the initiation of a loan, and so generally bank fees are assessed on riskier loans, or those issued to customer’s with more challenging credit situations. Generally, the riskier the loan, the higher the bank fee.
As to the second part of the question, “do you have to pay it?” In California, you essentially do not. It is not allowed for a California licensed car dealer to forward on the cost of a bank fee to the consumer for the purpose of securing their loan. This means the dealer may not itemize the fee, or increase the price of the car for the purpose of paying a bank fee in order to secure the loan, even if the customer agrees to do so.
This means bank fees are generally considered a cost of doing business for a car dealer, much like the cost of a SMOG, safety inspection, cosmetic or mechanical repairs, these are the things most dealers do in order to offer their customers a good experience. Unfortunately, the cost of a bank fee can vary, from as low as $99, up to $1,000, or $2,000 or more in some cases. This means dealers aren’t always able to commit to a “best selling price” up front, as the way a client pays for a car, can impact profit margins. While dealers can’t forward on the cost of a bank fee to clients, it may impact the amount they are able to discount a car from the advertised price.
At Petrol Auto Sales it is our mission to offer all our clients an excellent vehicle at a great value, no matter their credit, and no matter how they pay. This means we search far and wide for high quality vehicles we can buy at a good price, enabling us enough room to absorb a bank fee, and still offer our clients a competitive purchase price on the car, no matter your credit or income situation. You’ll find most of our cars priced at or below the current local market value for comparable cars, and we’re happy to secure our clients a loan even if we are being assessed a bank fee in order to do so. Apply Today to see what we can do for you!