Buying a new car is always a tricky affair, especially if you’re a novice. Dealer sharks are on the prowl and the only way to protect your interests is by staying informed! In this article, we’ve got your back. We reveal the required dealer fees and the ones that are nothing more than a strain on your wallet.
We also explain how to only pay the dealer invoice price in Canada on your new car instead of paying the full MSRP. Read on for more.
The Basics
Manufacturer’s Suggested Retail Price (MSRP): We talk about this one a lot but we cannot stress enough how you shouldn’t pay the full MSRP quoted by the dealer. The MSRP can be altered by the dealer as they wish, meaning it is up to you to negotiate and get the best price. This figure does not include sales tax.
(Psst, to find out how to avoid paying the full MSRP, read till the end!)
Incentives: Incentives vary from one brand to the next. They may also change depending on the payment option you go for. This discounted figure changes each month and can be deducted before or after tax. Some incentives double up as rebates, this means that the buyer has to cover the deduction before they can get the amount back.
Pre-Tax: The total price of the car before the sales tax, including MSRP, pre-tax incentives and add-on fees.
Sales Tax: A percent of the total price that ranges from 5 – 15%
After-Tax: The total price after deducting the sales tax, including MSRP, pre-tax/post-tax incentives, add-on fees and sales tax.
The Essential Fees
Freight: Manufacturers compute the average cost of transportation by determining the price to ship the car from the production location to its retail outlet.
Pre-Delivery Inspection (PDI): The cost of the maintenance assessment on the car when it first comes to the dealership. These checks are mandatory to make sure your car is ready to take on the challenges of the road.
Air Tax: A $100 charge applied by the government to all cars with an A/C.
Tire Tax: A charge ranging from $20 – $30 applied to a vehicle to promote the tire recycling program.
Regulatory Fees: This is a fee levied by the provincial government which is around $10; varies based on the province.
The (Avoidable) Money-Guzzling Fees
Admin Fee: This is the fee charged to cover licensing, insurance documents, processing loans or leases, activating satellite radio, etc. It is applicable to luxury vehicles only and is optional in every other case.
Extended Warranty: This is a standard warranty extension that is offered by the dealer before the vehicle is sold. You can buy this at any time and aren’t required to do so right away (despite what the dealer may have you think).
Block Heater: A fee for the block heater installation to keep the engine warm in colder weather. This is necessary only where the temperature is constantly below 0°C.
Rust Protection: A fee to apply any kind of rust proofing. Yes, it’s useful but not at all mandatory.
Nitrogen Tires: The fee to infuse nitrogen in the car’s tires. Again, this is useful in sports cars as it enhances safety when cruising at a high speed.
VIN Etching: The fee charged to impose the VIN on a car’s windows in order to reduce the value for potential thieves.
The Takeaway
Carefully assess the quote provided by your dealer and only accept the items you really want to pay for. You can compare the dealer breakdown to the list provided above. And guess what? You can…
Start Saving Right Now With a Dealer Invoice Report
A car dealer invoice report reveals the actual amount paid by the dealer to own the car. That way, when you’re haggling for a good deal, you won’t have to pay the full MSRP.
A majority of dealers turn a profit of 8.7% on selling a new car. When you’re aware of the true MSRP, you can follow the 3-5% rule – meaning you can add about 3-5% on the invoice figure in your report to calculate the most lucrative negotiation price.
It’s simple! Choose your make and model and see a complete breakdown of all fees.