The true cost of buying and owning a vehicle involves more than the price you pay for it. There are several other costs of buying and owning a car that you should include in your budget. By being informed, you can avoid being caught off guard. With this in mind, we've compiled a list of most of the car-buying costs you will likely see.
Most people don't have thousands of dollars sitting around to buy a car. The solution: financing one with an auto loan. If you are someone who needs to take out a car loan, you'll need to consider these expenses:
- Interest Charges
You will pay interest on your loan throughout its term until the entire balance is paid off. It's wise to consider the total cost of your loan - which includes interest charges - instead of just thinking about the monthly payment. A good way to calculate the amount of interest you'll pay is to use an auto loan calculator or amortization table.
- Down Payment
By putting cash down upfront, you can set yourself up to save money in the long run. A down payment reduces the amount you need to finance, which brings down your monthly payment and lowers the amount of interest charges you'll end up paying. This is why most personal finance experts recommend that car buyers have a down payment. It's also the reason our team recommends that buyers with bad credit always have money to put down.
Taxes and Fees
There's a big difference between the sticker price of the car you're buying and the out-the-door cost. This is because the latter includes taxes and fees. These will vary depending on where you live as well as the price of the car, but you can count on having to cover these three categories:
- Vehicle Registration Fees
These include the costs of registering the car, assigning the title, and buying license plates. The dealership will do this for you, so you don’t have to go the DMV or other government office(s). These registration fees can vary from state to state, but check your local DMV website for a calculator tool that can give you an estimate.
- Sales Tax
Buyers often pay a combination of state, county and local taxes on car purchases. This means the tax rate will vary based on where you live. In fact, some cities and counties charge more than others, so the amount you pay can even vary within the same state.
- Documentation Fees
These charges, often abbreviated to "doc fees," are what dealers charge to cover the costs associated with preparing and filing the necessary paperwork, such as the sales contract. In a few states, the government caps the doc fee amount. In states where it isn't regulated, the amount is left up to the dealer. So, because it can vary significantly among different dealers, you'll want to ask what the dealership charges early on in the process.
Other Fees You'll Want to be Aware Of
Don't get surprised by these other car-buying fees that come up frequently.
- Dealer Fees
Some dealers charge "dealer" or "dealer prep" fees that are written into the contract. Ask about these beforehand so you know what you'll be charged and why.
- Rust, Paint and Fabric Protection
Watch out for these and other dealer-installed "add-ons." These are extra items that you should only be paying for if you specifically requested them.
Here are some more, albeit less common, fees you may also run into:
- Market Adjustment Fee/Markup
- Compliance Fee
- Emissions Testing Fee
- Floor Plan Fee
The Bottom Line
The list of the costs of buying and owning a car is a long one. Make sure you don't forget to factor in insurance, gasoline, maintenance and repairs, and even depreciation. By knowing what to expect, you can better prepare yourself and your budget for financing a car.
Speaking of car buying, here is a tip if your credit has seen better days: Auto Credit Express can help you find financing. We have a nationwide network of special finance dealerships that help people with credit problems get financed. See what we can do for you today by filling out our secure car loan request.