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Buying Used Cars in Toronto: Additional Fees and the Monthly Payment

Updated on August 29, 2009

So, 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.

Every car comes with additional fees and taxes.
Every car comes with additional fees and taxes.

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

----------


>>

>


>>

>

                              10,790 
GST (5%):		      	 540	
PST (8%):			 863
 			      ------
After-tax subtotal	      12,193
License Fee: 			 125
			      -------
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.

Make sure the details of the deal are clear
Make sure the details of the deal are clear

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.




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    • profile image

      anonymous 9 years ago

      thank you for good structured info

    • profile image

      James 9 years ago

      Agreed, thanks for this, I was about to tell a used dealer to stick his admin' fee.

    • Andy Xie profile image
      Author

      Andy Xie 9 years ago from Toronto, Ontario, Canada

      No problem James. Good to know I could help.

    • profile image

      Maureen 8 years ago

      when you buy a used car privately are you taxed on the actual amount of the sale or a book value? thanks

    • Andy Xie profile image
      Author

      Andy Xie 8 years ago from Toronto, Ontario, Canada

      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.

    • profile image

      Aby 8 years ago

      Who does the sales tax go to, if the car is bought from a private party?

    • Andy Xie profile image
      Author

      Andy Xie 8 years ago from Toronto, Ontario, Canada

      You don't pay tax to the seller, you pay tax to government when you register you car in the provincial transportation office

    • profile image

      roman 8 years ago

      great article!

      But i don't understand the +50 in the car payment formula

    • Andy Xie profile image
      Author

      Andy Xie 8 years ago from Toronto, Ontario, Canada

      Hi Roman,

      Thank you for visiting.

      +50 is the interest. This is a raugh formula, just to give an idea.

    • profile image

      Xie Groupie 8 years ago

      Andy is cool cat!

    • Andy Xie profile image
      Author

      Andy Xie 8 years ago from Toronto, Ontario, Canada

      Thanks!

    • profile image

      Keith Watson 8 years ago

      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

    • Andy Xie profile image
      Author

      Andy Xie 8 years ago from Toronto, Ontario, Canada

      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

    • profile image

      John Y. 8 years ago

      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.

    • Andy Xie profile image
      Author

      Andy Xie 8 years ago from Toronto, Ontario, Canada

      In Ontario, the buyer is responsible for paying only the 8% PST. hope that helps.

    • profile image

      8 years ago

      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??

    • profile image

      karen 8 years ago

      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?

    • Andy Xie profile image
      Author

      Andy Xie 8 years ago from Toronto, Ontario, Canada

      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.

    • profile image

      karen 8 years ago

      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!

    • profile image

      Toronto condos 8 years ago

      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

    • profile image

      Stan 8 years ago

      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

    • profile image

      JerryT 7 years ago

      I just signed a purchase agreement and I'm being charged

      Administraion Fee $499.00

      PDI Fee $399.00

      Is this Legit?

    • Andy Xie profile image
      Author

      Andy Xie 7 years ago from Toronto, Ontario, Canada

      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.

    • profile image

      Lori Catz 7 years ago

      Thanks for posting this information. I had no idea.

    • profile image

      AJ 7 years ago

      Can I buy a car in Toronto without having an Ontario drivers license?

    • Andy Xie profile image
      Author

      Andy Xie 7 years ago from Toronto, Ontario, Canada

      Yes, you can.

    • profile image

      Martin 7 years ago

      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

    • profile image

      shiny 7 years ago

      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,

    • profile image

      Lori Catz 7 years ago

      What about the warranty and insurance? Buying a slightly used car brings everything down...overall price, warranty, insurance, fees, etc.

    • profile image

      AB mommy 7 years ago

      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!

    • profile image

      Francis 7 years ago

      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!

    • profile image

      JD 7 years ago

      Dealer for new car is saying TD is charging $500 admin fee for financing, is this the bank or the dealer charging this fee?

    • profile image

      Ryan 6 years ago

      Great article Andy, and really informative. Thanks for taking the time to write it. Very helpful.

    • profile image

      Dr Pissedoff 6 years ago

      Think u need some article updating now that the Gov has put the broom handle in our asses with HST... pardon my french

    • profile image

      rumpie the clown 6 years ago

      Are private sales subject to the broom handle HST now?It used to be 8% only on private sales.

    • profile image

      james 6 years ago

      thank you so much for this article.. helps a lot to get an idea..

    • profile image

      Praveen 6 years ago

      Thank you soooo much, just reduce my stress level by half, thanks again.

    • profile image

      jayanto louis master 6 years ago

      thank you v. much for good idea

    • profile image

      Skeptical 6 years ago

      It's interesting that you're a dealer, and you say all these 'additional' costs are justified. I'm just saying...

    • profile image

      Sarah Hill 6 years ago

      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!

    • profile image

      Martin 5 years ago

      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.

      http://usedcars.indiandrives.com/used_cars_for_sal...

    • profile image

      Greg 5 years ago

      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 naïve 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

    • profile image

      Mark 5 years ago

      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

    • profile image

      Ken 5 years ago

      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

    • profile image

      Ali 3 years ago

      Is this only for used car or new brand is different?

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