Getting a car through PCP or HP car finance is a convenient and affordable way of having your own wheels. 🚘 But apart from the deposit and your monthly repayments, are there other fees and charges that you need to prepare for? Yes, one of the charges to expect is the administration fee or finance fee for car loan.
To know how much you need to pay for the admin fee, you can check your car finance contract. Each car finance company and car dealership will have its own calculations and considerations when it comes to charging its admin fees. Here’s what you need to know about car finance fees and charges.
What is an Administration Fee?
Car finance companies and dealerships charge an administration fee on top of the car’s price tag to cover expenses incurred in processing documents of the transaction. Some lenders charge an admin fee while others may waive it. If your lender requires an administration fee, be sure to ask for a breakdown of the charges included. Some may also call it a “documentation fee” or “processing fee.”
Do I Need to Pay the Administration Fee?
Whenever a car finance company or car dealer turns over the vehicle to the driver, they need to prepare a good number of documents. This means carefully and meticulously going through each document to ensure that every piece of information is accurate. Such a process entails certain costs to the car dealer or car finance company. Your administration fee payment helps to cover the expenses and efforts put into the paperwork.
What Charges are Included in the Admin Fee?
The administration fee includes certain charges listed on the vehicle’s price tag. It is a service fee for processing documentation for a car purchase. Other than that, the admin fee also includes certain charges necessary for the dealership or car finance company to comply with government regulations. Lenders and car dealers need to maintain compliance with these rules for specific purposes such as anti-theft protection, vehicle history checks, safety protocols, consumer rights protections, certifications, and others.
What Am I Actually Paying For?
When a car is sold, the process requires many administrative responsibilities on the part of the dealer or car finance company. For example, they need to inspect the vehicle, run title checks, and also maintain safety protocols, among others. To perform these procedures, they need specialists who have adequate training, experience, and certification to ensure that each step follows the standards set by government regulations.
During the actual purchase, the dealership or car finance company will provide the breakdown of the procedures they conducted on the car. For secondhand vehicles, it is necessary for the company or dealership to perform in-depth analyses so they can gather information about the history of the car. On top of that, they see to it that all the paperwork will be completed in time.
Administrative Tasks Necessary in a Car Purchase
- Vehicle title processing
- Compliance requirements
- Vehicle emissions maintenance
- Informing the customer of their consumer rights and obligations to the lender
- Maintenance of records
- Staff training
- Rebates and discounts calculations
- And maintenance of technologies used to streamline documentation, among others.
- Security and privacy protection on customer data
These are just some of the tasks carried out by dealerships and car finance companies for each car that they hand over to the driver. They need to complete these procedures before they can charge an administrative fee.
What the Law Says About Admin Fees
According to law, car finance companies and car dealerships need to display the car’s full and final price, which includes all mandatory charges like administration fees. If they don’t do this, then their practice is what’s called a “misleading action,” and goes against the Consumer Protection from Unfair Trading Regulations 2008.
Dealerships and car finance companies also abide by the Motor Ombudsman’s code of practice. This is the motor industry’s self-regulated body backed by the UK government. The code of practice states that ads, promotions, and other communications and publications shouldn’t contain any content that can be misleading or might be misunderstood by consumers.
Apart from that, the code also includes that the quoted price of the car should be the one for which you can buy it. When the dealership or car finance company adds a hidden fee on top of what their advertised price tag is, then they’re going against this code of practice.
Can I Ask the Admin Fee to be Waived?
Most car finance companies and dealerships can be expected to be transparent when it comes to their admin fees. There are some charges that you can opt out of or you may choose to include add-ons like car insurance or car tax sales assistance, for example.
It’s a good idea to include short-term insurance coverage, especially if you want to drive the car immediately once it’s been handed to you. However, you’ll most likely get a better deal if you shop around and arrange your own car insurance ahead of time.
There’s no cause for worry when you see a charge for an administration fee. As long as the dealership or car finance company provides a breakdown of the charge, the fee can be justified. Good dealers and lenders will always let you know about any fees they charge.
Lastly, a quick tip is to try and negotiate the administration fee. There’s no guarantee that they will waive it but you can try and see what happens. The good new for those choosing Carmoola car finance is that our admin or option to purchase fee is only £1! See below 👇