How Much Will A New Vehicle Truly Cost?

When thinking about buying a new car, it’s easy to fall into the trap of only focusing on the sticker price. But purchasing a vehicle is a complex transaction, and there is a range of hidden fees everyone must take into account when determining the true cost of buying a new car. Moreover, the costs don't stop once you drive the car off the lot. Each month and year there are a variety of fees you must pay to keep the car in good order and street legal. So, before buying, make sure to factor in all of the costs associated with this type of purchase before deciding what your budget can accommodate. Let's start looking at them now.

Car Loan And The Interest

While some individuals can afford to buy their new car all at once, it is more common to take out a loan to pay for the car. Even if you pay some money down, it is important to look carefully at the details of the car loan and the interest the loan will accumulate over the years. Here is an example to help illustrate. Say you take out a twenty thousand dollar loan to pay for your new car. If the loan has an interest rate of eight percent and you take sixty months (five years) to pay back the loan, then you’ll be paying 405.53 dollars per month. By the end of the loan, you’ll wind up paying 4,331.62 dollars in interest on top of the original loan, totaling 24,331.62 dollars. To help cut down on interest over the life of the loan, try to shop around for the best interest rate possible. Also, make sure the loan does not come with unreasonable origination fees or processing fees that might add to the money you owe to the bank.

Continue reading to learn about maintenance and repair costs.

Maintenance and Repairs

Another type of hidden cost that comes with purchasing a new car is the fees for maintenance and repairs. The maintenance and repair costs associated with newer vehicles tend to be lower, usually only requiring basic things like tire rotations and oil changes every six months or so. These costs can vary depending on the type of car and the rates charged by your dealership or local mechanic. As the car ages, these costs tend to go up, as older parts tend to get worn down and break more easily. In addition to these expected upkeep costs, there may be large costs incurred if a part not under warranty malfunctions. Before buying, make sure to research the average costs of maintenance and repairs for the makes and models you are considering. Different models from manufacturers sometimes have drastically different averages over the life of the car.

Continue to learn about the cost everyone seems to complain about next.

Gas

On top of the costs already covered, there is also the essential source of energy for your car: gas. Unless you buy a newer purely electric vehicle, you’re going to need to fill up at the pump regularly, and those costs add up. Most consumers drive their cars for an average of twelve thousand miles per year. It takes a lot of gas to go that far, and those costs will vary depending on the location, price per gallon, and type of car you have. Prices fluctuate throughout the year based on global production and other broad economic factors, and different regions tend to have higher or lower prices based on things like local production and taxes. For the most part, those things are outside of your control, but if you opt for a new car with a higher fuel efficiency rating, it's possible to save a lot over the long run. Twelve thousand miles at twenty miles per gallon for 2.80 dollars per gallon will cost 1,680 dollars per year, whereas the annual cost would drop to 840 dollars at forty miles per gallon.

Continue reading to learn about how insurance costs work.

Insurance

The government requires drivers to purchase a certain level of auto insurance to be permitted to drive on public roads, and these costs can really add up depending on your circumstances. For some individuals, it can cost over three hundred dollars per month to provide insurance to a single driver with a single car. Over the course of an entire year, this amounts to 3,600 dollars! Fortunately, insurance companies offer a range of discounts. Some auto insurers offer lower rates for loyal customers, safe driving, or for having continuous coverage for a certain number of years. There are even discounts for students who get good grades, and for drivers who participate in defensive driving courses. With these discounts, it is possible to bring these costs to under one hundred dollars per person per month. To get the best rates, the most important thing to do is shop around. Different companies offer different rates across different regions, so check and see what’s available in your area.

Continue reading to learn about government fees.

Government Fees

The final major category to be aware of when buying a new car is government fees, which can crop up in a wide range of contexts. The first one you’ll encounter is the tax on your new purchase. If the vehicle's sticker price is twenty thousand dollars and your state has a sales tax rate of six percent, you’re looking at an additional 1,200 dollars, raising the initial cost to 21,200 dollars.

The fees don’t end there. Once you buy the car, you’ll need to get it registered in your state and have the title transferred to your name. This action will come with a range of fees owed to the government, often more than one hundred dollars, depending on the state. At regular intervals, drivers will also need to renew their registration and driver’s license, adding to the government fees. Finally, there are additional fees (tickets and court costs) for drivers caught breaking any of their state's driving laws.