The sticker price doesn’t tell the whole story
Congratulations! You’ve
found your perfect car, and the asking price is within your budget. Don’t celebrate too early, however, as there are many fees and hidden costs associated with purchasing a new car that you may not have considered—and you may even have to pay them up front. Don’t get caught off guard. Check out some of these common costs that buyers often fail to consider beforehand, so you know what to expect at the dealership.
Fees
While these will vary based on state and type of car (new or used), these costs can be quite costly. For example, a destination and delivery fee can run you anywhere from $500 to $1,000, depending on the manufacturer, and that is a bill that must be paid before the car is removed from the lot. Other fees include:
- Vehicle registration
- Title
- License
- Documentation
- Compliance
- Emissions testing
- Floor plan
- Advertising
- Dealer preparation
These fees can easily nickel-and-dime you into a stupor. According to Kelley Blue Book, the federal government requires that many of these fees be itemized on the sticker price. If a fee is listed, there is no getting around it. However, take a good look at the paperwork before you sign anything. If you see something that looks negotiable, try insisting on the fee’s removal. It never hurts to attempt the fine art of haggling.
Another non-negotiable cost—technically not a fee but a huge expense that must also be paid up front—is sales tax. Even worse, incentives are taxed in 30 of the 50 states, meaning that if you are offered a customer cash rebate (through the manufacturer, for instance), you are still charged tax on the purchase price before the rebate is applied. So be prepared for that number to be higher than you may have expected.
Add-ons
Although add-on features such as leather seats and a sunroof are already included in the price of the vehicle, beware of the upsell. Keep in mind that the finance manager is still an employee of the dealership, so his or her goal is always to increase the sale.
Michael Caudill, an auto expert who owns Driven Public Relations out of California, stresses to U.S. News and World Report that consumers should not take the bait.
“I always like to tell consumers that the finance manager is simply another salesperson at the dealership. They just happen to have a different title,” Caudill says, cautioning against extras like credit insurance, extended warranties or prepaid oil changes that will add to the cost of financing your car.
Finance charges
You’re already taking out a loan for tens of thousands of dollars for a new or new-to-you vehicle, but it’s easy to forget that you will actually be paying thousands more in loan interest over the duration of your loan. That said, it is best to do your homework on financing rates before you head to the dealership, or even secure your loan first.
Buying the wrong car
Getting a vehicle history report from a reputable source like Carfax is always a good idea, so you know ahead of time if the vehicle’s had multiple owners or if the odometer reading seems legitimate.
“We estimate more than 1 million cars are on the road right now with an odometer rollback,” Chris Basso of Carfax says in U.S. News and 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.”
Furthermore, the Bureau of Labor Statistics reports that households in America spend an average of $2,132 a year on car repair and maintenance, but with an unreliable car you are likely to spend more.
Buyers could drive themselves crazy thinking about all the hidden costs of purchasing a car, wondering if there are even more than just the ones discussed here or fretting about being able to cover the interest charges or repairs. But now that you are a more-informed buyer, you are already one step ahead of the game.
Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.