Chapter 10: Understanding A Dealers Quote

Even if you’ve bought a car at a dealership before, understanding a quote for a car can be confusing. For first time buyers who may not even understand what each fee means, this process can be daunting. In this chapter, we’re going to break down the fees you’ll likely see, what they mean and whether or not they’re mandatory fees.

The Fundamentals

MSRP (Manufacturer's Suggested Retail Price): The MSRP is the retail price of the vehicle, as the name says, this price is suggested by the manufacturer. Dealers have the ability to change this price, leaving room for car buyers to negotiate. The MSRP does not include sales tax or additional fees.

Incentive: Incentives are manufacturer to consumer discounts. While each brand has different incentives, typically each dealer will have all the same incentives from each manufacturer. The incentives you receive are different depending on whether you choose to lease, finance or pay cash upfront. Some incentives are rebates, meaning you’ll pay the initial deduction and will receive the money-back shortly after.

Pre-Sales Tax: The pre-sales tax is the total amount of the vehicle minus the tax. It consists of the MSRP, pre-tax incentives and additional fees.

Sales Tax: A percentage that is added to the total price of the vehicle. The sales tax varies from province to province and is typically 5% to 15%. 

After-Tax Total: This is essentially the total price for the vehicle. It consists of the MSRP, pre and after-tax incentives, additional fees and the sales tax. 

Invoice Price: This is the amount the dealership pays the manufacturer for a vehicle. A dealership will never sell a vehicle for the invoice price because they wouldn’t make any profit. 

The Mandatory Fees

Regulatory Charges: These are government fees. In Ontario, it’s known as OMVIC and in Alberta, it’s known as AMVIC. 

Freight Fees: Freight fees cover the costs of shipping to the dealership from the production centre. The manufacturers determine the amount of this fee and apply it to the entire country, regardless of the model or location of the dealership within the country. Usually, the freight fee is listed in conjunction with PDI. 

Tire Tax: A provincial fee for any vehicles purchased at a dealership to fund the nationwide recycling program. The tire tax usually ranges between $20 and $30 but varies depending on the province. 

PDI (Pre-Delivery Inspection): This covers the price of a thorough inspection of the vehicle once it’s been delivered. These checks are mandatory to ensure the vehicle is road safe and ready. Unlike a freight fee, the dealership determines the cost of the PDI.

Air Tax: Air tax applies to every vehicle sold that has air conditioning in Canada. The fee is $100. 

Non-Mandatory Additional Fees

Extended Warranty: An extension of the standard warranty that dealers offer before the purchase. Car buyers can buy an extended warranty at any time, so they don’t need to feel pressure to decide before they buy the car.

Administration Fee: This is a fee that dealers charge to cover the costs of the paperwork associated with the purchase or lease of a vehicle. This fee is only mandatory when buying or leasing a luxury vehicle. 

Nitrogen Filled Tires: This covers the cost if the car buyer wants to add nitrogen to their tires. Nitrogen filled tires are only required if buying a sports car as it helps the tires perform better at high speeds.

VIN Etching: VIN etching means to imprint the vehicle’s VIN into the windows. This is an anti-theft strategy, nobody is required to purchase this.

Block Heater Installation: This covers the cost of installing a block heater. The block heater helps cars start on especially cold days. Installing this heater is only necessary for places where the temperature is regularly below 0 degrees celsius. 

Rust Protection: While rust protection isn’t mandatory, it is recommended. 

What Appears on Financing and Lease Quote Only

Down Payment: The down payment is the amount paid upfront to lease or finance a vehicle to cover a portion of the costs of the vehicle, lowering monthly payments.

Amount Financed: This is the amount that the borrower will have to pay per month. It consists of MSRP, incentives, additional fees and sales tax while excluding any down payment or monthly interest. If getting a lease, this number will be much lower as with a lease you're not paying the full price for a car. 

Monthly Payment: The monthly payment is the amount the borrower pays monthly to cover his/her financing or leasing agreement. This number depends on the amount borrowed, the interest rate on the loan and the length of the term. 

Interest: Interest is the amount the lender charges for lending you the money, in this case, it’s listed in a monthly payment. 

Number of Payments: This is the number of monthly payments the borrower has to make until they own the vehicle. 

What To Do With This Information

Now that you’ve obtained multiple sales quotes for your preferred vehicles, make sure you’re only being charged for the upgrades/fees you requested. Compare each of the quotes from cheapest to most expensive and then for one last time, narrow your picks down to one car. 

What's Next

The last thing to do before going into negotiations is to look at the true costs of owning each car. We’re going to look at every additional expense that comes with owning a car and how these expenses can vary from vehicle to vehicle.