This post will teach you how to protect yourself from being fooled into paying more that you should for a new car. The content is based in Canada but can be applied to other countries. It’s assumes you already done some homework on buying cars so that you’ve started looking into Invoice prices of the cars you are interested in (Multiple sources would be best).
It would be good to become familiar familiar with a lot of the tricks sale people and their managers do and the things they make up in order to get you to buy a car at unfair prices. You will also want to know how not to tell the sales person things that would compromise your position as a buyer; such as your finances (What you can afford a month).
Think like a poker player!
And so this video will teach you something else that not many car buying videos have talked about.
Watch our YouTube video on Dealership Charges, options and fees!
The Offer to Purchase
This is a section for the new car you are negotiating for. You should know which car you are interested in and don’t let the sales person know that this one is the only car you want, even if it is. If you do, it’s like you are giving away your winning hand in a poker game.
This section is for your trade-in if you have one. I won’t go into any details on this as it’s not the focus of this post.
The additional options that you want to add to your new car. This contains total MSRP and also the negotiated discount you were able to obtain. When negotiating you need to know the best price for the car you are interested in. This is done based on your knowledge and research into the invoice price that the dealership paid for the car. You do this by using sites like Car Cost Canada that I mentioned above earlier.
And finally, the focus of this post. Remember!!! These are all OPTIONS. The sales person may try to make it sound like they are all mandatory but they are not. It’s just a section for them to make more money from you. I will go over each one to tell you some of the tricks that are used and also demystify them for you.
Breakdown of Dealer options and charges
Just another money grab. Why would you pay $500 for someone to do some basic documentation, photocopying, etc…? I’ve seen it range from $200 to $500. In one instance, when I was negotiating the price of the car all the offer forms that were used indicated that the Administration fee was $300. After we agreed on the price, and the official document was printed off to be signed by both parties, the Administration fee was suddenly only $200.
Tire Levy (4 Tires)
An environmental protection fee/surcharge that is passed down to you, the buyer.
Air Conditioning Recovery/Levy
An excise tax on vehicles imported or manufactured in Canada. In most cases this is charged to the dealer but it is passed down to the consumer.
Freight is for shipping the car from the factory to the dealership. It’s ridiculous that dealerships charge you for this. For example, since when do you buy something like a fridge and have to pay for the cost of shipping it from the factory to the store you buy it from?
PDI is for Pre-delivery inspection of the car after it gets shipped to the dealership. Not so sure dealerships even do much for this other than remove the packaging and plastic protection wrapped on the car.
The totals of these really shouldn’t be over $2K but most dealership will charge this or higher if they can get away with it. So we won’t let them!
One thing to note is that they will very sneakily include additional items in this line as acronyms of which you probably won’t know the meaning. This makes it look like you are getting a lot more and helps them to justify the high cost of each line item.
- PP – Paint protection… usually just waxing you can do yourself or get a dedicated car shop to do for much cheaper. Besides, the dealership usually outsources this work to car shops anyway.
- DK – Diamond Kote… another form of “paint protection” that you don’t need or should get a dedicated car shop to do instead.
- ABC/XYZ – Basically anything the dealership wants to add here, they can and if you don’t know what it is, why have it get added or even pay for it?
Other Dealer Options
If you don’t get told what it specifically is and it is hidden like this… it just means they don’t want to let you know because if you did, you wouldn’t be happy. OR, it’s just used to bump up the cost of the car.
Battery Charger Installed
What battery charger? Most cars don’t come with one and if it was a hybrid, it already has all it needs to be able to charge from your house and should come with the car.
If you were going to get a battery charger from them, it probably is just a regular car battery charger that they throw in that costs $50 but you are paying over several hundred dollars for.
Most cars in Canada come with block heaters installed from factory. All the dealership does is install a extension cord and plug to the block heater. They are trying to charge you $500 for plugging in a $50 cord
Watch our video on what block heaters are, why you might need one, how not to get ripped-off getting one installed, plus more!
Remember, don’t believe the sales person if they tell you that it doesn’t come from factory with it. You should have done your homework to find that out beforehand. As mentioned in the video above, you can always call the parts department ahead of time to check if a block heater comes installed from factory for the car you want. Then also ask them how much it costs for the extension cord/plug and what the installation charges are. Then, just for fun, you can test your sales person out and see how truthful he/she is when you ask. You can watch him/her lie to your face.
Cars nowadays usually come with a basic alarm system. You do not pay extra for that. They may try to sell you window etching, intense etching of the vehicle parts but the car will either already come with it or they are charging you $500 for something that costs less than $100 to do somewhere else.
Where to go from here?
I hope this demystifies these additional Dealer options and charges. Now that you know those additional options/charges aren’t mandatory, you can more easily negotiate. In the end, be informed and focus in the Final price (Amount due on delivery). Just negotiate the final price and don’t worry about the inflated Dealer options and charges.
Trying to negotiate by each individual dealer option is a losing battle as they will make is seem like they are giving you a discount if they choose to lower the cost of one but are actually ripping you off with all the other options that are inflated in price or not needed.
Don’t let them run circles around you with the MSRP price or “Mandatory” Dealer options and charges.
Remember, what you find out with reputable sources (like Car Cost Canada) outweighs what a sales person tells you… there’s a conflict of interest there and they are there to make money… you are there to buy a car at a fair price.