CA lawmakers approve adding up to $500 processing fee to vehicle purchases

CALIFORNIA – Last week, California Senate voted 29-1, approved SB 791, a measure that would add a document processing fee up to $500 to vehicle purchases and leases.

The bill now moves to the Assembly where it could be approved as is, modified or rejected.

According to bill author Senator Dave Cortese, SB 791 helps cover the real cost of services like DMV processing, fraud protection, and loan paperwork—while ensuring transparency and consumer protections remain in place.

“Without dealer-based document processing services, customers would have to go through several significant steps on their own to process a complete vehicle purchase or lease transaction, including making trips to DMV to complete multiple steps, going to at least one bank to shop around for rates, selling their trade-in vehicle on their own via third-party sites with no consumer protections available,” said Cortese.

If approved, the law would go into effect in 2026.

‘Fee has not kept pace with inflation’

According to Cortese, dealerships are allowed to charge car buyers a documentation processing fee to cover the cost of preparing and filing documents required by the state.

Existing law allows dealers to charge up to $85 for document processing.

Cortese says the current $85 fee is the lowest in the country. He says from state to state, the fee ranges from $85 to $844.

Depending on the state, there may be no limit on the fee, the fee may be capped, the dealer may negotiate the fee with the buyer, or the dealer may remove the fee.

SB 791 proposes to increase the document processing charge from $85 currently to 1% of the total price of the vehicle, capped at $500.

Bill sponsor, the California New Car Dealers Association said the document processing fee “has not kept even close to pace with inflation or the increasing costs that dealers face in complying with ever-increasing state law and regulations.”

The bill exempts vehicle sales to California from these rules.

Consumer advocacy group says document processing fees are ‘junk fees’

A critic of the measure calls document fees a “junk fee,” arguing they misrepresent actual costs, lack upfront disclosure, and appear as non-negotiable “official” charges during transactions.

“If car buyers were fully informed up front about the costs, they might choose alternatives, such as purchasing vehicles from private parties and / or joining their local auto club (AAA), which typically provides car title transfer, licensing, and registration services to members for a relatively small fee, or no fee,” said advocacy group Consumers for Auto Reliability and Safety.