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Making an Offer

Once you're ready to purchase your new car, familiarize yourself with the buying process.

  • Know your rights when leaving a deposit
  • All-in pricing
  • Learn how to negotiate the best deal
  • Learn the pricing terms
Consumer rights

Before signing anything, learn how to protect yourself as a consumer. Signing a sales offer and leaving a deposit represents your commitment to purchase and is legally binding. The dealer has the right to keep your deposit if the deal is not completed in order to cover his costs. If you wish to have your deposit returned in the event the deal falls through, include a statement to that effect on your offer to purchase. A deposit of $500 is adequate.

All-in pricing protects Ontario car buyers

All-in pricing is the law. If a registered dealer of the Ontario Motor Vehicle Industry Council (OMVIC) advertises a price for a vehicle (new or used), the Motor Vehicle Dealers Act (MVDA) requires that the price include all fees and charges the dealer intends to collect.

Note: HST and licensing do not have to be included in the price if the advertisement clearly and prominently indicates they are not included. Licensing refers to the actual cost of vehicle registration and plates – it cannot include extra fees added by the dealer.

What must be included in an all-in advertised price?

Examples of fees or charges that must be included in an advertised price are:

  • Freight
  • PDI-PDE (pre-delivery inspection/expense)
  • Administration fee(s)
  • Government levies (air tax, etc.)
  • OMVIC fee
  • Safety and emissions test (unless the ad contains an “unfit vehicle” or an “as-is vehicle” disclosure statement)

Further, if a dealer intends to charge for products or services they have pre-installed on a vehicle, those costs must also be included in the advertised price. Some examples include:

  • Nitrogen/tire protection package
  • Warranties
  • Security or theft deterrent products/services (etching, etc.)
  • Fuel

Note: While dealers must include all fees and charges in an advertised price, these fees and charges must be listed separately and itemized on the bill of sale.

What should a consumer do if a dealer tries to add charges in excess of the advertised price?

Walk away, shop elsewhere and report the offending dealer to OMVIC.

Note: OMVIC does not regulate vehicle manufacturers; therefore, advertisements placed by manufacturers do not have to comply with the MVDA and all-in pricing is not required in manufacturer ads. That said, some manufacturers voluntarily comply with the all-in pricing provision and commendably provide transparency to consumers.

Negotiating the price

The amount of profit included in the cost to a buy a new car depends on many factors, including the type of vehicle, supply, demand and the dealership.

As a rule of thumb, the amount of profit figured into the cost of a new vehicle ranges from 5-15%. There is little room for price negotiation with entry-level vehicles. Negotiation power increases with each step up the ladder from entry-level to luxury vehicle. Vehicles in extremely high demand and low supply are often subject to higher mark-ups.

The dealer's cost for options vary considerably. Factory options are commonly marked up 10-20% and dealer-installed options can be marked up 30-40%.

Negotiate the price of the new vehicle first before talking about your trade in or financing options.

A reasonable offer would allow the dealer at least a 3% mark-up of the invoice price as profit. Negotiate terms, like the price and interest rates. Make sure you get everything in writing, including all promises made by a dealership.

Remember:

  • If a dealer won't talk price, think twice about purchasing a vehicle there.
  • Don't fall in love with any vehicle – your objectivity will suffer.
  • Learn what the car originally cost the dealer and negotiate up from the factory invoice, if possible. Do not negotiate down from the sticker price.
  • Keep the deal simple. Don't confuse negotiations with discussion of a trade-in or financing.
Pricing terms

Know the pricing terms before entering into negotiations.

Invoice price

Dealer invoice price, sometimes referred to as the factory invoice price, is the price the dealer pays the manufacturer for the vehicle.

Holdbacks

Many manufacturers offer their dealer holdbacks. This is money that will be remitted to the dealer once the vehicle is sold. These rebate payments may be equivalent to 1-3% of the manufacturer’s suggested retail price (MSRP) of the vehicle. This money normally is used by dealers to pay interest on loans used to buy vehicles on their lot or for other business.