5 Hidden Costs of Buying A New Car – Things You May Not Think About

Updated November 15th, 2020

The cost of buying and owning your dream car involves more than simply the purchase price and a big rebate.

When calculating how much you can afford to spend on your new car, it is important to consider other hidden charges, such as those listed below.

Fuel Economy

Nowadays, it is hard to predict fuel prices’ stability because they fluctuate at different times of the year.

They rise and fall, sometimes by surprisingly considerable amounts.

With this in mind, you should make sure that you are getting nothing but a fuel-efficient car with a powerful engine and burns less fuel, such as the Toyota Yaris or the RAV4, if you are looking for an SUV.

Best Vehicles with the Highest Gas Mileage

Below is a table of vehicles with the best gas mileage as of 2020.

All of the cars are under $30,000 except the Chevy Volt.

The MSRP for it is $33,220.

All of the vehicles get at least 43 miles per gallon in the city.

The highest is the Toyota Prius at 58 mpg.

Government Charges

When buying a new car, you should be prepared to pay the registration transfer fee, stamp duty (if in another country), motor vehicle tax, and compulsory third party insurance.

The registration transfer fee and stamp duty vary from one state to another and are paid once.

Motor vehicle tax and third-party insurance, which covers injuries you cause to other people, are paid monthly or annually, varying from state to state.

There is a fee calculator on most state licensing websites.

Property & Sales Tax Rate by State

I have a list below for the amount of tax you may pay every year for a $23,000 vehicle.

The amount paid every year is the “Property Tax” of the state.

A lot of states have a $0 property tax.

Included is the sales tax rate for each state.

As you can see, some states have one or the other.

While some have both.

There are only two states in which you pay no sales or property tax – Alaska and Oregon.

Ongoing Operating Costs

Apart from fueling, you will also need to consider parking and maintenance fees.

Since you’ll be traveling around the country doing business, visiting friends, or just exploring places, you’ll have to deal with parking fees.

Below is a table of average maintenance, auto insurance, and annual gas costs.

With so many cars available today, parking spaces’ demand is high, explaining why parking fees are high.

As you use or drive your car every day, it will need regular maintenance to stay in good working condition and serve you well for a long time.

Always check the air conditioning unit, tires, engine, and other parts of your car to see if they need repairs or cleaning.

You may also want to take the car to your local mechanics for professional checks.

Note: As vehicle price declines as it gets older, the price of maintenance goes up. A vehicle that is less than 4 years old has minimal repair bills. In comparison, a car over 8 to 10 years old can have $1,000 annual repair expenses. This is one of the primary reason Honda and Toyota vehicles are popular. They retain a high value, and the maintenance costs are lower compared to other vehicles.

To stay safe, it is advisable to buy a car with a longer warranty or guarantee to protect against huge service or repair bills in the future and go for a model that will be less expensive to maintain.

Unlike other car manufacturers, Toyota offers capped price servicing to help you reduce the burden of servicing your car.

Car Insurance

After buying your new car, one of the most expensive vehicles ownership elements you’ll have to deal with is comprehensive insurance.

Comprehensive coverage is meant to protect your car against damages that may come about due to perils not related to a collision or accident.

Note: If you are buying a new car, this won’t apply. One way to find additional savings is for you to take on more risk. As illustrated in the chart above, if your vehicle is less than the bank’s amount of cash, then buy liability insurance or minimum coverage.

These include theft, vandalism, fire, falling objects, natural disasters such as a tornado, and civil disturbance like riots.

Insurance companies offer different comprehensive car insurance quotes depending on the car owner’s age, marital status, driving record, type of car to be insured, and the car’s condition.

Be sure to get insurance companies quotes and compare rates no matter where you live. 

Resale Value

The last thing you need is a car that loses its value too quickly or is worth a fraction of its original price when it comes time to sell.

In fact, depreciation can cost you more, even over fuel and maintenance combined.

Note: As illustrated by the chart, you can see a $25,000 vehicle loses 5K in value in one year. If you have a loan for $25,000, you are probably “underwater” at this point. The best time to buy a vehicle is when it is 2 to 5 years old, depending on the type, etc. For example, the same $25,000 car can be bought for $12,500 when 4 years old. This is particularly important since vehicles are made well now. The bonus to you is substantial savings.

So, you have to consider a car’s resale value when buying one.

Some companies have memberships in place that will guarantee your resale or trade-in value, such as Toyota Access, so make sure you investigate all offers available to you.

Greg Fowler

Managing Member of AutoInsureSavings LLC, Greg has been in the insurance industry for 12 years and enjoys rebuilding vehicles. His goal is to help drivers save on anything related to automobiles. Travel and enjoying the outdoors are some of his hobbies. The best way to reach him is at his Twitter or Facebook Profile.