How Much Are You REALLY Paying for Your Vehicle

When you walk onto a car lot, the price you’re most likely concerned with is the sticker price of the car you’ve been eyeing. That’s an excellent place to start, but you’re likely to spend a lot more on your vehicle than you think.

When contemplating a new vehicle purchase, consider these factors before you agree to the contract.

1. Financing

   The true cost of financing your vehicle lies in the interest rate. You could buy the cheapest car, but if you get a lousy loan, you will end up paying a fortune in interest. As a potential new car owner, work on saving as much as you can to help offset the cost of a loan, then shop for the lowest available interest rate. Even a 1% difference can help you save big in the long run.

    

   Choosing a shorter loan term can also help save on interest. Get preapproved for your loan before you visit a dealership. If the dealership offers a better rate, you can always opt for that.

    

2. Hidden costs

   These hidden costs can add hundreds, even thousands, to the price of your vehicle:

    

   • Sales tax—This varies significantly by state and the price of your vehicle. Ask the dealership to estimate for you or look up your state’s rate online.

   
   

   • Dealer fees—Some dealers may add processing fees to your contract. Be sure you understand all these extras. If you spot something questionable, confirm whether it’s necessary or try negotiating in price before you sign on the dotted line.

   
   

   • Vehicle history report—This report can help provide additional insight if you’re buying a used vehicle and usually costs $30–40. If you’re a Mountain America member and finance through us, you’ll get a full rebate on your AutoCheck report.

   
   

   • Extended warranty—The dealership may offer you an extended warranty if you’re buying used. Do your research but don’t feel obligated to buy. Warranties can be expensive and many have exclusions—but the right warranty could be a live saver someday.

    

3. Maintenance and tires

   Eventually, every vehicle shows some wear and tear and repair costs can vary widely. According to AAA, the average yearly expense for vehicle maintenance is around $766.50, and the average annual cost for tires is $147. If your car is a bit older, these costs could be higher and may continue to grow.

    

4. License, registration and taxes

   If you own or operate a vehicle, you must have it registered with your state’s Department of Motor Vehicles. Be sure to take this into account when evaluating the total cost of your new car. The vehicle registration process will involve providing personal information such as your Social Security number and proof of state residency. The average annual cost for a medium sedan is around $690.

    

5. Insurance

   Nearly every U.S. state requires a vehicle to have insurance coverage. Keeping it current is definitely in your best interest. If you get caught without it, you could get a ticket that will cost you hundreds. If you get in an accident without insurance, you could be fined thousands. Making those monthly payments may seem like a nuisance, but it’s a must when buying a new vehicle. Rates and policies vary—shop around and get a few quotes from different carriers to see what the best option is for you.

    

6. Fuel

   Fuel costs can vary widely by location and vehicle type. According to the Bureau of Transportation, the average annual cost of gasoline based on driving 15,000 miles per year is $8,849. AAA recommends using top-tier gas because it keeps engines 19 times cleaner, improving the vehicle’s overall performance and fuel economy. Another way to save money is by going electric. Without a gasoline engine to maintain, electric vehicles can help you save big on both repairs and fuel.

The true cost of owning a vehicle varies widely by age, make, model and location. Before you purchase your new set of wheels, estimate the total cost by doing a little research and analyzing if it works with your budget.