The Hidden Costs of Buying a Car
Avoid These Top Car-Buying Blunders That Can Eat Away At Your Budget
Purchasing a new car is exciting, no doubt about it. But that doesn’t mean we don’t wince when we see the bill. To make things worse, that bill might be higher than it should be. That’s because there are many hidden costs when purchasing a car that can easily sneak up if you’re not paying close attention. Read on to find out what they are.
Plain and simple, when buying a car you’re likely to accrue a large set of extra fees that aren’t always calculated into your final cost — vehicle registration, title, license, documentation, compliance, emissions testing and dealer preparation are just some of the fees you’ll need to pay, and they can add up quickly. While these fees can’t necessarily be avoided, it’s a good idea to look at your paperwork before signing on the dotted line for that car. If you notice anything you think might be negotiable, it never hurts to ask.
Add-ons – It’s not uncommon for dealers to pitch you a variety of extra add-ons to your vehicle that may not be worth the extra money. While some may benefit you and could be worth the extra investment, others are best avoided.
“I always like to tell consumers that the finance manager is simply another salesperson at the dealership. He or she just happens to have a different title,” says Michael Caudill, owner of Driven Public Relations and who doesn’t recommend add-ons such as credit insurance, extended warranties or prepaid oil changes.
Interest rate – If you’re obtaining an auto loan, just like any type of loan, it comes with an interest rate. But all rates are not the same; they vary, including with your credit score, how much you’re putting down on the car, etc. To avoid future surprises — and a major headache — find out your interest rate before you complete the deal, and factor it into your budget so you’re not hit later with this hidden expense.
Sales tax – While it’s something most people know they have to pay and isn’t technically “hidden,” sales tax is not factored in by everyone. It adds significantly to the cost of buying a car and could easily come as a shock once you see how much it adds up to. Make sure you ask the dealer to calculate the cost of the sales tax into the final cost of the purchase, as well as your monthly payments, so you know up front what you’re paying.
Maintenance and repair costs – If you’re purchasing a preowned vehicle, find out the car’s mileage and maintenance record. A vehicle history report tells you precisely how many owners the vehicle has had or whether the odometer reading seems legitimate.
“We estimate more than one million cars are on the road right now with an odometer rollback,” Chris Basso of Carfax says in U.S. News & World Report. “The cost of buying one of these cars is, on average, $4,000. That figure represents a combination of lost value and, perhaps more important, repair costs that the buyer will likely incur sooner than expected.” In addition, American households shell out $2,132 a year on car repair and maintenance, according to the Bureau of Labor Statistics reports, and with an unreliable car, it’s likely that number will be higher.
When buying a car, it’s important to do your research to make sure you’re not being hit with any hidden fees. Ready to get an auto loan from your financial institution? Stop by or give us a call today to see what we can offer you.
Published by Cumberland County Federal Credit Union
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