Buying a car isn’t something most people do too often, which is why they don’t always recognize and understand the fees that are charged. Price quotes are filled with additional fees, but not all of them are mandatory. In this article, we will break down what fees you must pay for, what you can negotiate and what you should definitely question.
Mandatory Fees:
Freight
- This fee is charged for delivering the vehicle from the factory to the dealership. It’s determined by the manufacturer who takes the cost of the rail, ship and truck delivery, divides it by the number of units and passes that fee onto the car buyer.
- Also known as: Destination Fee.
- Transparency: It should be on the factory invoice.
- Should you pay: Yes, amount is dependent on the manufacturer.
Pre-Delivery Inspection (PDI)
- This fee is for getting the vehicle ready for the road by filling the gas, checking engine oil, coolant and the performance of windows, lights, A/C and a whole lot more. This inspection is done once the vehicle is at the dealership to avoid dangerous accidents that could occur if the vehicles were transported prefilled with flammable liquids. If you’re uncertain, you can always ask to see the checklist and verify that it is legitimate.
- Transparency: It should be on the factory invoice.
- Should you pay: Yes, amount is dependent on the manufacturer.
Air Tax
- When you buy a new vehicle with air condition, it will come with an air tax fee. It’s a move toward greener energy, as air conditioning consumes fuel and adds to the overall vehicle weight.
- Transparency: It’s a governmental tax.
- Should you pay: Yes, it’s $100.
Tire Tax
- As part of the tire recycling initiative, this tax is imposed to help fund the nationwide program to pick up old tires and recycle them into new products.
- Transparency: It’s a governmental tax.
- Should you pay: Yes, it’s anywhere from $20-$30.
Regulatory Charges (OMVIC or AMVIC)
- The task of keeping fees and dealerships transparent and honest is charged to the OMVIC or AMVIC (Ontario/Alberta Motor Vehicle Industry Council) which ensures dealerships have all-in pricing, so consumers are informed about fees.
- Transparency: It’s a governmental tax.
- Should you pay: Yes, it’s $5 in Ontario and $6.25 in Alberta.
Non-Mandatory Fees:
Administration Fee
- These fees cover licensing, transactions, and financial documentation. In certain cases, it may also cover in-car services like Bluetooth and satellite radio. This fee is usually only applicable for luxury cars and is optional for a non-luxury car.
- Transparency: It should be on the factory invoice.
- Should you pay: Only if it’s on the invoice, also worth negotiating.
Extended Warranty
- This covers the warranty after the manufacturer’s warranty has expired. It’s not necessary, and even if you want the extended warranty, it doesn’t need to be purchased immediately.
- Transparency: It’s set by the manufacturer or a third-party vendor.
- Should you pay: At your discretion.
Block Heater Installation
- A block heater is designed to keep the engine warm in colder regions so your car doesn’t fail or stress to start in subzero weather. This fee is for the installation and is not necessary for warmer climates.
- Transparency: It’s installed by the dealership.
- Should you pay: Yes, if you live in a region where freezing temperatures are the norm.
Rust Protection
- Rust protection or rustproofing prevents the metal body from corroding, which can be problematic if paint flakes off, but it’s not necessary. Although it’s mostly a cosmetic issue, it is still a good idea to consider some form of rustproofing to protect from the elements and salt in winter.
- Transparency: It’s applied by the dealership.
- Should you pay: Since this is easily done aftermarket, it’s worth shopping around if you want it.
Nitrogen-Filled Tires
- Having nitrogen instead of air is only necessary if you’re buying a high-end sports car. Because nitrogen is less affected by temperature, it improves performance, fuel efficiency, safety and keeps a consistent tire pressure under the stress of reaching top speeds.
- Transparency: The tires are filled by the dealership.
- Should you pay: No, unless you’re buying an expensive sports car.
VIN Etching
- This process etches the VIN number on the window of the car, in an attempt to deter thieves. However, the effectiveness of this precaution is not guaranteed and it’s not mandatory.
- Transparency: It’s done by the dealership.
- Should you pay: No, unless it gives you peace of mind.
If there are any fees or taxes that you’re uncertain about, you can ask for clarification and that should help you decide whether or not you should pay. Legitimate fees are usually on the invoice and sometimes are imposed by the government for you to pay. Fees that don’t explain what they are and exist as acronyms or a name that sounds redundant are definitely worth questioning. In the case of additional fees for features that you want (rustproofing or VIN etching), the dealership tends to charge a lot, so it’s worth your time to negotiate or shop around before putting money down for any extras that you’d like.
To find out the exact additional fees are on any vehicle, check out our free dealer cost report.
