Mandatory vs. Non-Mandatory Dealer Fees Everyone Should Know

Posted by  | December 05, 2013 |
Ghostwritten by Elliot Chan. Formerly published by
ew040512licencerenewalThe car buying experience is an exciting endeavour. You have selected the perfect vehicle for your lifestyle, one that will take you to many exciting places and to run your important errands—but before you even leave the lot the dealer tells you about some unaccounted fees. Perhaps you had been too excited about your travels that you forgotten, which fees are mandatory and which are being imposed?

Avoid paying for these extra fees, you don’t need them and they could be illegal

Dealers often try to trick buyers into paying more with documentation fees, also known as dealer fees. They would print them onto the contract and attempt to convince the buyer that they are paying for the cost of administration work. Documentation fees, should be clearly displayed as part as a part of MSRP and should not be hidden. Don’t fall for that trick, because there are already overheads that pay for their papers and pens.

Dealers receive reimbursement from the manufacturers for any marketing preparation needed, so don’t fall for the dealer prep fee. Dealers might attempt to cloak it under some other names including: shipping and handling or simply shipping. Make a note of it and negotiate accordingly.

Floor plan fees are the cost dealerships have to pay to keep the vehicle on the lot. Just like dealer prep fees, customers should not have to pay for the accessibility to view a car, the same way a grocery store will not charge you a price for viewing an basket of apples.

Additional dealer mark-ups, is another rabbit dealers pull out of their hat. There isn’t even an excuse for this fee, except that the dealers think they can get away with it. If you ever see this fee on your contract, get up and walk out. The dealer might as well be a pickpocket doing such a nasty thing.

How much are mandatory fees and why do they exist?

In order to drive a vehicle in Canada, a car must be registered and insured. Often, the dealers will be happy to assist you with the paper work as a part of their service. The cost is dependent on a few things including, province, make and model of the car, and driver’s history. But as far as buying a car goes, this process is a must.

Another mandatory fee is the destination charge. It shouldn’t be a secret that cars have to be transported to the dealership and instead of driving the new car from the factory to the lot and spoiling the new ride—an auto transport truck is used. This fee is a reason many choose to consider buying used.

You can find which fees are mandatory from get a dealer cost report here.

When should you talk about add-ons during the car buying process?

You should have a clear idea of what you need for your new car before you even step onto the lot or into the showroom.

If you don’t, ask yourself: do you want a new speaker? Leather seats? Alarm? If the answer is yes, well, perhaps you want to consider talking about add-ons before the process even starts or the smarter plan is to do some research away from the dealer. Outside companies may offer a better deal for additional features.

Dealer fees?

There are three parts needed to calculate the actual net cost of the dealer: including invoice prices, factory holdbacks, and factory to dealership incentive. Often it averages around 3-5% of the overall cost of the car.

To avoid any fraud or plain dishonesty ask for the dealer to show you the factory invoice for the car as soon as you have interest. Don’t fret if they refuse, but do note the decline, because most factory invoices are searchable online here on Simply punch in the make and model of your choice and see the price range of your vehicle.

Who should you contact when you need to know the honest truth about fees?

Dealerships are business, and businesses might not be the best place to go for the truth about fees. Still if you have done your research at and recognize the price they have paid and the few mandatory prices, the dealers will see that you are unshakable—after all a dealer can only make you pay what you think you’ll pay.

Contacting provincial marketplace regulating services such as the Ontario Motor Vehicle Industry Council (OMVIC) orMotor Vehicle Sales Authority of British Columbia will be an effective way of finding out which fees are valid and how much they should be.

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