Admin fees, etching and Nitrogen – are these fees legal?

I’ve come across a lot of discussion recently from disgruntled car shoppers regarding dealer-added fees and extras such as admin fees, theft recovery etching / stickers like Globali, and nitrogen filled tires. Consumers are often surprised when they are about to purchase a vehicle only to find hundreds (or even thousands) of dollars of extra fees tacked on to the selling price. And understandably they are not too happy about it! Without properly understanding what these fees are or if they’re even legal, you could end up paying much more than necessary. So being informed and well-equipped before going to buy a vehicle is essential.

If you’ve ever looked at a vehicle’s bill of sale, you’ve likely seen fees for line items described as “admin fees”, “theft recovery etching”, “freight”, “PDI”, “nitrogen filled tires” etc. These charges aren’t necessarily illegal, but they can be. Due to ambiguity and a general lack of transparency regarding extra fees and “value added” extras (I use quotation marks as not all consumers will perceive added value), I’m going to share my understanding of the subject in hopes of helping others understand their rights as consumers and what the dealer can and cannot charge.

First and foremost, I’m not a lawyer and this is not legal advice. I’m just sharing information based solely on my understanding of various laws and my experiences as a car broker.

The first piece of powerful information to be aware of: “all-in pricing laws”. Per the Ontario Motor Vehicle Industry Council (OMVIC – the regulatory body responsible for administering and enforcing automotive law within Ontario) and the MVDA 2002 (Motor Vehicle Dealers Act, 2002 – the automotive legislation OMVIC enforces), if a dealer is advertising a unique vehicle with its own VIN (vehicle identification number) at a specific price, the price stated must be the all-in price except for HST and licensing if the ad illustrates this in a clear and comprehensible manner (e.g. “price excludes HST and licensing”). This means any and all charges associated with selling the vehicle must be built into the advertised price, including freight, inspection charges, safety inspection and emissions testing (unless there is a disclosure stating the vehicle is being sold “unfit” or “as-is”), and any administration fees, other fees, levies and HST. So, if you’re looking through Trader.ca or a similar vehicle listing source and a price is advertised by the selling dealer, by law it should be the all-in price, save perhaps HST and licensing if clearly specified. But be aware if the price you’re looking at is in an ad attempting to sell a specific unit within a dealer’s inventory, or if the ad is simply promoting a make and model and listing the MSRP. If it’s just a generic manufacturer ad promoting a make and model, the stated base MSRP may not accurately reflect a dealer’s current inventory which may have value added extras already equipped (more on this in the next paragraph). But if you’ve done your homework, you won’t be surprised by any extra fees.

The next powerful piece of info? Being aware of “coercive” or “tied” selling. To my knowledge, our consumer protection laws cover coercive or tied selling: the act of tying one good or service to the sale of another. You cannot be told you must buy product or service X in order to obtain product or service Y. This is an illegal practice. So, it’s at this point we need to be clear about what constitutes tied selling and what does not. If a dealer already has a vehicle within their inventory and they’ve chosen to equip it with something like theft recovery etching, they have every right to price the extras accordingly and as they see fit (as long as it’s built into the advertised price). This is a value added option they’ve elected to install, much in the same way they could with other value added options like larger wheels, window tinting, a better sound system etc. and raise the asking price accordingly. And consumers have every right not to purchase that vehicle! However, if you’re placing an order for a new vehicle that will be factory built specifically for you, the dealer cannot tell you that something like theft recovery etching is mandatory, as this would constitute tied selling. The same would be true for a vehicle within inventory that you know does not currently have value added extras already equipped. Basically, it is tied selling if the value added extra is not yet installed but you are being told you must purchase it; and it is not tied selling if the vehicle already has the value added extra installed prior to you placing a deposit and/or signing a bill of sale. In either case, the advertised price must be inclusive of all of all fees and extras. You cannot be presented with unexpected extra fees at the time of sale.

So, the big distinction is: “is the vehicle already equipped with the value added extra, or not? If it’s not, you cannot be told it’s mandatory to pay for the extra. But if the dealer has already fitted the vehicle with value added extras, they can ask for more money accordingly. Odds are, if you’re going to walk away from a deal over a few hundred dollars, they’ll likely reduce or waive the fee altogether. If you feel they’re breaking all-in pricing laws or utilising tied selling, mention this to them and let them know that you intend to report the incident to OMVIC – this can be very persuasive!

Unfortunately, not every dealer is ethical, operating legally, or in compliance with all-in pricing laws or the MVDA 2002. A phone call to the selling dealer before going to see the vehicle in the flesh can prevent you from wasting your time if the advertised price is not inclusive or if their inventory already has undesirable or expensive value added options installed you do not want. And if the dealer isn’t registered with OMVIC, don’t set foot in the dealership as they’re operating illegally. The same goes for car brokers like me – we must be registered with OMVIC. Any business operating in the automotive industry within Ontario that deals with consumers must be registered with OMVIC, by law. This includes dealership salespersons, too. Don’t just trust the dealer’s or car broker’s website that they’re registered with OMVIC – call OMVIC or use their online search tool (and pay particular attention to the “status” of their registration within your search results) to ensure the dealer or car broker is indeed currently registered and operating legally. There are reasons (forty-five thousand reasons to be exact) you should want to deal exclusively with legally operating OMVIC registered dealers and brokers, but perhaps I’ll get into that in more detail in a future post.

As for nitrogen filled tires, their benefit for consumer application is dubious at best, as the air around us is about 78% nitrogen anyway! So is it worth paying for nitrogen filled tires? Well, do you believe the party responsible for filling the tires with nitrogen has managed to create a complete vacuum within the tire and successfully voided it so pure nitrogen can be pumped into the tire? I’m not so sure, and even if they could I doubt the alleged benefits warrant the price. If you drive on properly inflated tires you’ll be just fine.

I hope this helps clarify dealer added fees and value added extras. I’m always available to assist with your vehicle purchase and to help you attain the lowest possible price. Feel free to leave a comment or question below and I’ll do my best to help!

Angus McComb

Owner, Car Compass. 416-477-9328 or toll-free at 855-STEER-ME