Are Car Dealerships Charging Canadian Consumers Hidden Fees?

Are Car Dealerships Charging Canadian Consumers Hidden Fees?

Written by Matthew Taylor
Fact-checked by Caitlin Wood
Last Updated August 18, 2021

In Canada, there are car dealerships that will try to tack on a number of fees, in order to make a profit,  when you’re buying a vehicle from them. Each individual fee can cost you as much as $1,200. Some are mandatory while some are just pure profit for the dealership. These fees can add up if you don’t question the ones that aren’t necessary. When you don’t know which is which, buying a vehicle can become much more expensive than you originally thought.

Here are some questions you should ask your dealer when buying a car.

Types Of Fees Often Charged By Dealerships

The fees that dealerships tack onto the purchase price of a vehicle you’re buying include:

  • Freight – This fee is charged by the manufacturer to transport a vehicle from the factory to a dealership. This fee is mandatory.
  • PDI-PDE (pre-delivery inspection/expense) – Manufacturers charge this fee to get a car roadworthy, such as filling up the gas tank. These fees are generally mandatory since it costs the dealership money to do this inspection.

Watch out for dealerships trying to sell you a lemon car.

  • Administration fees – These fees include documentation, transaction, or licensing fees that dealerships tack onto the purchase price of a vehicle. If a dealership charges you these fees, you might want to question them.
  • Government levies – The government charges levies such as regulatory fees, tire tax, and air tax when any vehicles are purchased. The dealership passes these levies onto you. These fees are mandatory because the government always charges them.

Check out these 6 secrets your car dealer doesn’t want you to know.

  • Go Green tire levy, Security Registration, 1st Year Protection – There is a cost to purchasing tires, but sleazy dealerships may also include things such as unnecessary road hazard insurance. Ask your dealership to break this fee down so you can be sure you’re only getting charged for what you should be.
  • Brokerage fees – These fees are charged by the dealership to complete the transaction of purchasing a vehicle. The only purpose of this fee is for the dealership to make some more money. Question this fee if a dealership charges you for it.

Fees And Advertising

Depending on the province you live in, the fees that must be included in car ads can vary.

In Ontario, for example, registered dealers must include all fees and charges they will collect in the purchase price of any new or used vehicle they are selling. They can only charge the following extra fees:

  • Harmonized Sales Tax (HST)
  • Licensing (i.e. vehicle registration and plates)
  • Safety standards certificate for vehicles advertised as unfit or as-is
  • Extra options that the buyer has agreed to

If dealers want to charge for something they have pre-installed on a vehicle, they are required to include those costs in the advertised price. These costs include:

  • Fuel
  • Warranties
  • Nitrogen for your tires
  • Tire protection package
  • Locking wheel nuts
  • Security or theft deterrent

Find out what car dealerships do with unsold cars.

Watch Out For Add Ons

In order to boost their profits further, many dealerships will try to convince you to accept a number of vehicle add-ons. These extra features and accessories are completely optional but are meant to tempt you and make you feel more secure with your purchase. However, more times than not, these add-ons are frivolous charges that simply make your car more expensive. Some common add-ons include:

  • Loan Protection Insurance – Loan protection insurance is an optional service that many dealerships and lenders will try to play it off as mandatory. This product is an expensive form of insurance that protects both the lender and you. It covers the cost of the loan in the event you are unable to make payments due to a job loss, injury, illness or death.
  • Extended warranties – Extended warranties on cars are usually more expensive than the repairs you need in the long run. According to a study by Consumer Reports, 55% of car owners did not use their warranty and those who did had a median price of $1,200. It concluded that “those who did use it spent hundreds more for the coverage than they saved in repair costs.”
  • Anti-theft devices – These anti-theft devices can easily cost a few hundred dollars. Yet, there’s no measure on how well these anti-theft devices work. You’re essentially paying a price for an item whose value is unknown.
  • Vehicle accessories – Vehcile accessories like window tinting is a common add-on some dealerships will try to sell you. While it may look cool and offer more privacy, it’s an unecessary expense that will only make your car more expensive.
  • Paint Protection – Another expense your lender may try to scare you into is paint protection. It’s a clear coat that is sprayed onto your car to protect it from natural things like acorns, bird droppings and paint chips. Like rust proofing, you’ll need to re-apply it during the year. Instead, you can protect your car by waxing and polishing it yourself.

Bottom Line

Many dealerships try to make more money off you by adding extra fees to the purchase price of your vehicle. Some are truly necessary, but some are just to earn the dealership a few hundred extra dollars. Make sure you know what extra fees they charge and what you should question so you don’t end up being taken advantage of.

Rating of 4/5 based on 15 votes.

Matthew joined the Loans Canada writing team in 2021 while was finishing up a Bachelor's degree at the University of Saskatchewan. It was there that he discovered his love of writing. His work has appeared in several publications, including the Canadian Student Review and In his spare time, Matthew enjoys reading, geocaching, and spending time with his family and pets.

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