Mandatory vs. Non-Mandatory Dealer Fees: How to Decipher a Price Quote

A vehicle price quote can be a tough document to decrypt, especially if you are not sure what each fee stands for. So, if you have already obtained a price quote for each car on your wish list, but you have no clue as to what you are looking at, then here is some guidance.

NOTE: Price quotes vary from one dealer to another, so you may not always see the same fees or denotations. If something confuses you, always ask for a clarification.


MSRP (or Manufacturer’s Suggested Retail Price): The retail price of a car, as suggested by its manufacturer. Dealers can alter this amount at their discretion, which means that shoppers can always negotiate the amount. Keep in mind that the MSRP does not include the sales tax or any additional fees.

Incentive: A manufacturer-to-consumer discount that may or may not be listed (it will be if it is offered). Incentives tend to vary by brand, but stay the same among the dealers within each brand. They also vary from one payment option to another. The discounted amount changes each month and can be deducted before or after tax, depending on the offer. Some incentives also exist as rebates, meaning that the buyer has to cover the deduction before receiving their money back.Keep in mind that some dealer quotes may not use the word “incentive” to describe this deduction, opting for words like “discount” or “rebate.”

Pre-tax total: The total price of a vehicle before the sales tax. It incorporates the MSRP, pre-tax incentives and additional fees.

Sales tax: A percentage of the total price that varies among the provinces and territories. It ranges from five to 15 per cent.

After-tax total: The total price of a vehicle after the sales tax. It incorporates the MSRP, pre-tax/after-tax incentives, additional fees and sales tax.

Mandatory Additional Fees

Freight: The price of shipping a vehicle from the location of production to its respective retail space. To determine this fee, manufacturers calculate the average cost of transporting a vehicle to a dealership in a specific country and then apply the amount to all of them, regardless of the vehicle model or dealership’s location in the country. This allows freight fees to be the same nationwide.Freight is often listed in combination with the PDIcharge as “Freight and PDI.”

PDI (or Pre-Delivery Inspection): The price of performing a maintenance check of a vehicle when it first arrives at a dealership. These checks are obligatory– to make sure each vehicle is road-ready.Unlike the freight fee, the amount is determined by the dealer. It is often listed in combination with the freight charge as “Freight and PDI.”

Air tax (or Federal Air Conditioner Excise Tax): A $100 fee that the government of Canada applies to all vehicles with air conditioning.

Tire tax: A provincial fee applied to any vehicle purchased at a dealership to fund the nationwide tire recycling program. The charge ranges from $20 to $30, depending on the province.

Regulatory charges: Government-imposed fees administered by OMIVC (Ontario Motor Vehicle Industry Council) or AMVIC (Alberta Motor Vehicle Industry Council) in their respective provinces. The OMVIC charge is $10, while the AMVIC fee is $6.25.

Non-Mandatory Additional Fees

Admin fee:The amount dealers charge to cover expenses such as licensing, arranging insurance documentation, processing a loan or lease with a financial institution as well as activation of satellite radio, Bluetooth and other in-car services. This fee applies to luxury vehicles only (and sometimes non-luxury vehicles at luxury dealerships), but it is optional in every other instance.

Extended warranty: An extension to the standard warranty that dealers sometimes offer before a vehicle is purchased. It is possible to buy an extended warranty at any time, which means that car buyers are not obligated to do so right away.

Block heater installation: A fee for installing a block heater, the purpose of which is to keep a car’s engine warm in cold climates to make sure it starts. Installing block heaters is a requirement in areas where temperatures are continuously below 0°C.

Rust protection: A fee for applying some form of rustproofing. While this service can be beneficial, it is NOT required.

Nitrogen-filled tires: The cost of adding nitrogen to a vehicle’s tires. This service is required only if you are purchasing a sports car, because nitrogen improves drivability, safety and fuel efficiency when driving at high speeds.

VIN etching: The cost of imprinting a vehicle’s VIN onto its windows, the purpose of which is to reduce the vehicle’s value to potential thieves. It is an anti-theft measure that no one is obligated to purchase unless they really need it.

What Appears on Finance and Lease Quotes Only

Down payment: The amount paid before financing or leasing a vehicle to cover a certain portion of its price.

Amount financed: The amount a car buyer has to cover in monthly payments. It incorporates the MSRP, incentives, additional fees and sales tax, while excluding the down payment and monthly interest. This number is significantly lower on lease quotes since a typical lease does not cover a full vehicle price.

Number of payments: The amount of payments a car buyer has to make before the vehicle is fully purchased or the lease offer is expired.

Interest: The cost of borrowing, listed as a percentage of the monthly payment.

Monthly payment: The amount a car owner has to pay each month when leasing or financing a car. It depends on the amount financed, number of payments and interest rate.

What Will Not Appear on Any Quote

Invoice price: The amount a dealer pays a manufacturer for each vehicle in their showroom. A dealer would never sell a car for this price because doing so would leave them profitless.

What to Do With the Information

Read each dealer quote carefully and make sure it contains only the items you wish to pay for. Compare the numbers on the quote to the numbers in our free dealer cost report. If the pre-tax total is somehow higher on the quote, then the dealer may have listed a few additional (and likely optional) fees. Keep in mind that certain mandatory fees, such as Freight and PDI, may be higher on the quote than in our dealer cost report. If that is the case, then you may have to negotiate with the dealer to bring them down a little bit.

Once you are done, arrange the quotes in the order of least to most expensive. This way, you will be able to compare them to each other and choose the one that meets your needs best.

What to Do Next

Before committing to a vehicle, we suggest calculating how much each of them costs to own. This way, you will know for sure which purchase is the most cost-effective.