Missouri Dealer Administrative Fees
Dealers in Missouri can charge an Administrative Fee to incur addtional profits
In most scenarios the majority of the profit that you incur when selling a vehicle will be the markup of the vehicle. So you will normally go to a dealer auction, buy a vehicle at low as you can then mark it up to sell retail on the lot. The markup will usually be the majority of your profit, but the state does allow a dealer to incur additional profits by charging what is known as an ADMINISTRATIVE fee. So what is an Administrative fee, it is a fee you can legally charge to cover your ADMINISTRATIVE costs, such as paper, stamps, internet access etc. it covers a dealers Administrative costs, but the State does have very strict guidelines that you must be aware of before charging an Administrative fee.
Administrative Fees May be Charged by Missouri Motor Vehicle, Boat, Trailer, & Power Sport Dealers
The maximum Administrative fee that a dealer can charge is in relation to the Consumer Price Index and I will show you to find out the current maximum in just a moment as it is Based on the Consumer Price Index and Amount May Change Every Year Must Declare Administrative Fee to be Charged When Applying for or Renewing License and I will show you that process in a moment as well If you are charging an administrative fee the Department of Revenue will deduct 10 percent of total of Administrative fees that you have charged in a month from your chosen checking or savings account. And the State will use that 10 percent to build Missouri’s new electronic titling system that will be created in the next few years, after the state has built the new e titling system, the state will reduce the 10 percent down to one percent.
If You are Charging Administrative Fees, the Same Administrative Fee is Charged to Every Retail Customer, a few years ago we had some dealers in Missouri that would charge an administrative fee to one customer, charge an administrative fee to another customer, and then the third customer might state that they are not paying an administrative fee, so the dealer would waive the fee for the third customer. Well think about this scenario, the dealer charged the previous customers additional fees which gave the previous customer legal recourse against the dealer and the customers would win every case. So what I am getting at, if you are going to be an Administrative fee charging dealer you will set one Administrative fee and charge the same Administrative fee to EVERY retail customer. If you do have a customer demanding that they are not going to pay an Administrative fee, you can actually lower the price of the vehicle to where it would equal the same amount, but if you are an Administrative fee charging dealer you can never WAIVE the fee, you wil charge the exact same amount to every retail customer.
You Must Disclose Administrative Fee Amount and Legal Disclosure Text on Bill of Sale,
A“Document Preparation” or “Document Processing” Fees May Only Be Charged By Licensed Attorneys, if you are not a licensed attorney you may NEVER charge a Document Preparation Fee or a Document Processing fee, however licensed motor vehicle dealers in Missouri may charge an ADMINISTRATIVE fee.
As stated a moment ago the maximum amount that a dealer can charge as an administrative fee can change every year and it is based on the Bureau of Labor Statistics Consumer Price Index. I want to show you this chart that explains how the Maximum administrative fee amount can change every year. When the legislature passed the initial law in 2021 they set a maximum administrative fee of $500 that year based on the consumer price index. So the initial maximum administrative fee that a dealer could charge in 2021 was $500. Well the consumer price index grew by 4.7 percent during 2021 so the maximum rate that could be charged was 4.7 percent of the 2021 rate of $500 so dealers could charge $523.50 as a maximum administrative fee in 2022. The consumer price index grew by 8 percent the next year so dealer could charge a maximum of $565.38 in 2023, an amount which is 8 percent greater than the $523.50 amount that was allowed to be charged the following year. In 2023 the consumer price index grew by 3.9 Percent so if you add 3.9 per cent to 523.50, you just multiply 523.50 by 3.9 per cent to come up with the maximum charge for 2024 which would be 587.43 cents see how that works, now I want you to be aware if you are charging the maximum rate allowed by law you could find your customers experiencing buyers remorse when they see the sticker on the window of a vehicle that you have for sale says $3,995 and when they get into the office and find out the price is over $500 higher, it could lead a customer to decide to “look around” You will need to find out what you think might be a reasonable Administraive fee charge in your area, a $199 admin fee or a $249 admin fee may be more acceptable for your customer than a $587.43 administrative fee.
I want to show you how to find out the annual percentage growth of the Consumer Price Index because that will determine the maximum amount that a Missouri dealer can charge as an administrative fee, you can go the Bureau of Labor Statistics website at bls.gov/cpi and every January you will see the percentage growth of the Consumer Price Index from the following year. As you can see during this year, the consumer price index grew 3.9 percent over last year, so in this scenario you would multiple the current maximum administrative fee by the growth percentage to figure out the current years maximum administrative fee that can be charged.
You will need to let the Department of Revenue know if you will be charging an administrative fee with the first time that you are applying for your dealer license or when you are renewing your dealer license. Whey you are applying for or renewing your license at mydmv.mo.gov you will see this question that asks if you will be collecting an Administrative fee, if you leave the no box checked you will then enter your bond and insurance information like I showed you earlier in the course,
So you will need to select your bank account type, savings or checking, you will enter your bank name, your bank account number, your bank routing number and the exact administrative amount that you will be collecting, and that will be the amount the exact amount that you charge to EVERY retail customer. The State will compute the total number of sales that you made that month from your sales reports, and they will deduct 10 percent of all the Administrative fees you collected that month from your checking or savings account.
It is VERY important for you to be aware if you are charging an administrative fee you must include the following text on the bill of sale: "AN ADMINISTRATIVE FEE IS NOT AN OFFICIAL FEE AND IS NOT REQUIRED BY LAW BUT MAY BE CHARGED BY A DEALER. THIS ADMINISTRATIVE FEE MAY RESULT IN A PROFIT TO DEALER. NO PORTION OF THIS ADMINISTRATIVE FEE IS FOR THE DRAFTING, PREPARATION, OR COMPLETION OF DOCUMENTS OR THE PROVIDING OF LEGAL ADVICE. THIS NOTICE IS REQUIRED BY LAW." This disclosure must be on your bill of sale, this is State law
Some dealers are satisfied with the profit they make on the Markup but I want you to be aware that you will have a lot of costs that are associated with your new business. You will pay a fee every time you buy a vehicle at a dealer auction, you will pay a fee every time you sell a vehicle at a dealer auction, you will have to pay for your bond and insurance every year, you had to pay tuition for your dealer training course so you do have a lot of costs associated with this business and I am assuming that you are starting this new business to make as much money as possible, and lets say you are charging a $200 administrative fee and you sold 10 vehicles in a month, you will really see that an Administrative fee can substantially add to your profits, but you will need to determine whether you charge administrative fees to every retail customer or you will never charge them at all.
The state of Missouri does not have any continuing educational requirement for licensed motor vehicle dealers. I don’t mean to be overly direct with you but when you finish your dealer training course in a few moments, yoiyu are on your own when it comes to finding out about new laws. One reason so many states require dealers to take continuing education is so that you can learn about new laws that have changed and affect the legal operation of a dealership. Missouri has no continuing ed requirement for dealers, so how do you find out about new laws? I want to show you how right now. It is very important for every dealer to be aware that the majority of dealer operations are regulated by state law. So your legislature basically has complete authority over the dealership industry in Missouri so we need to have an understanding of how and when they operate. Missouri’s legislative session takes place from the first week of January through the second week of May each year. So every January our State Representatives and State Senators go to Jefferson City for the Legislative session. Any bills that are introduced during session and signed by the Missouri Governor normally become law on August 28 of each year. August 28th is the date specified by the Missouri Constitution as the date the most laws take effect. Many, many dealer laws have changed each year for the past several years. Since Missouri does not require dealers to take continuing education, how will you find out about any new laws that take effect in the future.
Since most laws change on August 28 of every year, I recommend that you go to the missouridealer.com website the first week or so of September every year, and click on the dealer videos link at the top of any page. And if there is a new dealer law that will affect the operation of your dealership, I will post a new video at the very top of the page discussing the new law. Since the laws change on August 28 try to visit the missouridealer.com website the first week of September each year to find out if a new law has taken effect that will affect the operation of your dealership. I really hope that you are finding all of this information helpful.
I am here to help you
start and run your Missouri Dealership!
Thank you very much, Delus Johnson-Missouri
Dealer Seminars