Cars aren’t cheap, and worst of all, buying one is not a one-and-done kind of transaction. There are plenty of costs that go beyond the sticker price that can change the true cost of buying a car, like maintenance, gas and insurance.
The car itself is usually the biggest single cost. There’s a phrase you’ll hear thrown around, MSRP, which stands for manufacturer’s suggested retail price. This price can vary depending on trim level (different versions of the same car) and any optional features on the car.
“So you’ve got the base price,” says Greg Migliore, editor-in-chief of Autoblog.com. “Usually carmakers advertise that as the cheapest, least expensive, most basic car. You probably don’t want that car.”
Optional packages, like a sunroof or satellite navigation, cost extra. Make sure you build out the features you can’t live without before you go to a dealer, so you have a good idea of what you’ll end up paying.
The average car price in the U.S. was $36,113 at the end of last year, according to Kelley Blue Book. If you choose to finance your purchase, you’ll have to factor in interest.
The amount of interest you’ll pay over the life of your auto loan depends on a few things, including how big your down payment is and the length of the loan. The interest rate itself depends on several factors: your credit score, your debt-to-income ratio, how much you borrow and how much you put down.
But sometimes there are deals to be made.
“If you’re a returning customer, sometimes they’ll give you 0% financing,” says Migliore.
This is another cost that’s highly variable, where insurance companies tend to use your driving record, the type of car you own and your age to determine your rates.
“They don’t make their formulas public, to my knowledge,” says Migliore. “You’ve just kind of have to shop around for quotes and find one you like.”
There are plenty of things that can go wrong on a car, so you’ll need to budget to keep it running. AAA says average maintenance and tires run about $99 a month for a new vehicle, and you’ll want to make sure you bump your emergency savings a bit to make sure you can cover any bigger surprise expenses.
There are a few ways you can keep these costs low, and Migliore says the best thing to do is be proactive: get your oil changed on time, rotate and align your tires regularly and use the right kind of fuel if your car requires more than regular.
“Keep good records,” Migliore says. “A lot of car companies have an app that will track your maintenance for you. Long term, that’s going to help you to keep costs down because then there are fewer surprises.”
Taxes and fees
There are a couple more things you’ll have to pay at the dealership, and those are pesky taxes and fees. Fees can range from a destination fee, a license fee, a title fee, and it all depends on the dealer and the state. Same is true for taxes. Be sure to check how much auto tax you’ll have to pay where you live and how much the mandatory fees are.
“Maybe you’re looking at a couple different dealerships,” says Migliore. “That’s where you can just, during the straight negotiation, you can say things like ‘Can you waive this fee?’ Maybe they will; you don’t lose anything by asking. It’s totally reasonable to ask dealers for basically anything.”
There is one more cost that won’t hit your bank account right away: depreciation. Carfax says a car loses 10% of its value the moment it’s driven off the lot, and it can lose 19% of its value within the first year of ownership.
“Depreciation is important, it’s critical,” says Migliore, “but to me it’s not the end-all, be-all because who knows what’s going to happen two, three, five years from now. All cars are going to depreciate.”