Buying Used Cars in Toronto: Additional Fees and the Monthly Payment
83So, you've negotiated a price that suits you and your budget. But is that the price you'll be paying? Probably not, because the price you see on the tag and the price you negotiate is just the base price. You should expect some additional fees. This hub explains the usual additional fees and taxes when buying a used car in Ontario. Further down this hub, I'll also show you a useful formula for figuring out your monthly payment, if you're taking the financing option.
Additional Fees (Ontario)
Additional fees are not scams. You'll find additional fees in just about every used car dealer in Toronto, and in Canada and the United States.
Here are the typical additional charges when you buy a car in Ontario:
- GST (5%) and PST (8%)
- Administration Fee ($295)
- Emission Safety and Delivery ($495)
- License Plate ($125)
- Warranty Charge
Let's say you are purchasing a $10,000 car. What would be the total cost, if you were paying in cash?
Base Price: 10,000
Administration Fee: 295
Emission & Safety Test 495
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>
>
10,790
GST (5%): 540
PST (8%): 863
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After-tax subtotal 12,193
License Fee: 125
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Final Total 12,318
>
As you can see, in Ontario, your $10,000 car will end up costing you just over $12,000. It's a big difference, so it's good to know these charges, and what they are.
The administration fee is just that, an administration fee charged by the dealership. The emission and safety fee goes towards the emission and safety test, which is required by the Ministry of Transportation of Ontario. The costs I have stated above ($295 and $495, respectively) are the general standard in used car dealerships in Toronto.
There is a 13% tax on the price of the car, the administration fee, and the emission safety/delivery fee. If you need a license plate, there is a $125 charge which includes the plate and a 1-year sticker. There is no tax on this.
You may want to shop around for warranties. Some dealers will give you a basic 2-year Powertrain warranty (for engine and transmission) for free, while other dealers may charge some money for it.
When you first see the price of a vehicle, and when you are negotiating, make sure the details are clear. Include or excluding taxes? Administration fees? The charges add up so you want to make sure you weren't negotiating for a different price than you thought you were.
Charges in addition to that of the negotiated price are common in used cars dealerships in Toronto as well as most other places. Wherever you are, just be sure you know the details before you seal the deal.
Financing: the Monthly Payment
With all these fees, you might not have enough money to pay it all with a cheque. Financing is a great option, allowing you monthly payments. The interest rate when you buy used cars is higher than new cars because new car dealerships usually do their own financing (so they can offer "0%"), also called in-house financing, while used car dealerships offer you financing from the bank.
The interest rate depends on your own credit history. It is true that you'll be able to get financing with "Good credit, bad credit, no credit!" but with bad credit, your interest rate will no doubt be much higher. If you have a good credit history, the bank may offer you a rate of Prime + 1. Many dealers advertise around 8.89%.
TIP OF THE TRADE: From experience, I have learned a simple formula for obtaining an approximate car payment, assuming an 8.89% rate and 0 down payment.
Monthly Payment = L / M + 50
L = loan M = number of months in term
Basically, you divide the amount of money you need to borrow, divide by the amount of months in your term, then add fifty dollars, for your monthly payment.
Above, I used the example of a $10,000 car, which adds up to $12,318 after taxes and fees. What would your monthly payment be? Here's an example, assuming 8.89% interest rate, 0 down, and a 5-year term
12318 / 60 + 50 = $255
It is not an exact formula, but it is very close and it more than enough for a general idea of your monthly payment. But of course, it will depend on the exact interest rate you can obtain.
CommentsLoading...
Agreed, thanks for this, I was about to tell a used dealer to stick his admin' fee.
No problem James. Good to know I could help.
when you buy a used car privately are you taxed on the actual amount of the sale or a book value? thanks
Hi Maureen,
For the private car sale, the tax is on actual amount or book value, whichever is highter. When the actual amount is lower, you can submit your support documents, then you may get taxed on actual value. But in most situations the book value is much lower.
Who does the sales tax go to, if the car is bought from a private party?
You don't pay tax to the seller, you pay tax to government when you register you car in the provincial transportation office
great article!
But i don't understand the +50 in the car payment formula
Hi Roman,
Thank you for visiting.
+50 is the interest. This is a raugh formula, just to give an idea.
Andy is cool cat!
Thanks!
Hi Andy,
I live in Michigan and I am considering buying an Ontario registered car in a private transaction. What is the best and least expensive way to get the car from Canada to the USA? What costs will there be beyond sales tax and license fees in Michigan, if you know, and what costs will there be in Canada if the car is shipped or driven to Michigan. Thanks
Hi Keith,
I'm sorry that I can't be of much help on that. Try searching Google for methods of shipping from Canada to USA and registering a car there. Thanks for reading my hub.
Andy
Hello Andy,
I am a first time buyer and I am trying to buy a car from a private seller for 2000 but I just can't figure out how much it would cost me in the end. Do the e-test and safety tests cost as much as they are stated above in your article? And will they charge both pst and gst for private sales?
Thank you in advance.
John.
In Ontario, the buyer is responsible for paying only the 8% PST. hope that helps.
Thanks for the info
Quick question
so say if i get a 10 000$ car from dealer would it be 12 000 after every thing dont i have to pay dealership price??
Last night I just signed for a used car with a deposit of $500 conditional on financing. The contract included costs of an admin fee $295 , PDI fee of $395 and a DOT fee of $495.
I feel stupid because I was rushed to sign as they were closing and I didn't fully understand these fees. Have you heard of them and what do I get for this money? If they are legitimate I have no problem paying them.
Also is there a cooling off period for a deposit? If so what should I do?
b - I'm not very clear on what you mean. The sticker price is negotiable (usually) and then on top of that you have taxes and additional fees, as well as interest for financing.
Karen - For my dealership, the buyer only pays admin and emission/safety. Those are standard fees in most used car dealerships in Ontario. I'm not sure if the fees you mentioned are legit or not. I advise you call your dealership and ask someone to explain it to you. As for the deposit, if you are doing the financing through the dealership, you can tell them you can't afford the downpayment. In my dealership, the deposit can be refunded without reason.
As you suggested I called my dealer to ask about them and tried to explain them away as costs for auction, fixing small things, etc but when I said that these costs and extras should be included by the asking price he eliminated them from the deal on the spot along with the taxes on them that he charged. (my guess is that he gets away with it sometimes so why not try).
Thanks so much for your help, you save me a bit of cash!
I think having +- 25% additional "tax" is pretty restricting, especially now, when the car market needs help...anyway, I believe we have pretty enough various fees, taxes, payments, licences, eh...:)
take care
Thanks for writing this Andy, I'm relatively new to Canada and had been looking at used cars for a few months now. I had no idea these fees were going to be added, this will definitely cause me to adjust my budget.
~S
I just signed a purchase agreement and I'm being charged
Administraion Fee $499.00
PDI Fee $399.00
Is this Legit?
Hi Jerry,
I think that sounds about right. Different dealerships may charge different fees but they should all add up to the same. $900 sounds legit.
Thanks for posting this information. I had no idea.
Can I buy a car in Toronto without having an Ontario drivers license?
Yes, you can.
Hey I'm looking at buying a car from around 9000 to 10000
would you be able to list out the fees etc that I woould run into at a toronto dealership?
Thanks
hi Andy,
i recently bought a used car from a dealer but he just added the administration fee and emission and safety fee without mentioining on the bill. is that ok or he has to give a certificate for the emission safety.
thanks in advance,
What about the warranty and insurance? Buying a slightly used car brings everything down...overall price, warranty, insurance, fees, etc.
thanks for this easy to understand breakdown! we are about to purchase a pre-owned from a dealer, it's good to know when finalizing and negotiated the price!
Be careful people, some Toyota dealerships have "Toyota Certified Used Vehicle" beside the add on the website, but this doesn't necessarily mean that the car was already put through their certification program yet!
Dealer for new car is saying TD is charging $500 admin fee for financing, is this the bank or the dealer charging this fee?
Great article Andy, and really informative. Thanks for taking the time to write it. Very helpful.
Think u need some article updating now that the Gov has put the broom handle in our asses with HST... pardon my french
Are private sales subject to the broom handle HST now?It used to be 8% only on private sales.
thank you so much for this article.. helps a lot to get an idea..
Thank you soooo much, just reduce my stress level by half, thanks again.
thank you v. much for good idea
It's interesting that you're a dealer, and you say all these 'additional' costs are justified. I'm just saying...
I almost always use AutoTrader.ca since I don't like to finance, I like to pay cash. I have had great luck with them so far!
That's very beneficial information! Thanks. This monthly payment structure has given a nice idea about the second hand car purchase. I will definitely share your post with my friends.
Andy, I'm sorry to shatter your illusions, but it's not true that "administration fees" are charged by "just about every used car dealer in Toronto, and in Canada and the United States" as you state. I've bought several new cars, and I know better than that.
Toyota Canada is not even allowed to charge their customers an "administrative fee."
I've bought 3 new Buicks within the past 5 years and have not paid an "administration fee" with any of those purchases.
One dealer where I bought two of the Buicks does not even charge an "administration fee." The dealer where I bought my third Buick attempted to charge me a $195 "administration fee." I told the salesman either the fee was removed or I was walking...it was removed.
I will not pay any extra profit to a dealer regardless of what kind of "fee" they word it as.
Andy, either you're quite naive about how you spend your money and don't really mind getting ripped off...or else you're a dealer and on the receiving end of those "administration fees."
-Greg
I just purchased a used truck and when I looked at the final document of sale he had the box checked for plates but when I looked at where the price should be it just said extra? does that mean he is going to try and get me to pay for the plates when I go to pick it up
Hi Andy I purchased a used car from a dealership and paid taxes on it at the dealership does that mean im paying taxes again when i register the vehicle at the MTO
anonymous 4 years ago
thank you for good structured info