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What You Should Actually Expect to Pay When You Buy a Car

Finance | 07/04/2022 22:00
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Buying a car can feel like a minefield when it comes to unexpected fees. Even if you have been able to successfully negotiate a good deal on the actual price of the car, that’s not even close to the car’s true price. So today we are going to talk about what a car actually costs and how you can prepare for the extra costs that you might not have been thinking about.

Here’s what you should actually expect to pay when you buy a car.

What are the common fees that you will have to pay when buying a car?

No matter what state you live in or how much you spend on your new car, you will inevitably be required to pay certain fees. The vehicle registration, documentation fee, and sales tax are three additional costs you should expect to pay when buying a new car.

Vehicle Registration Fee

This is the fee that the state charges to register a new vehicle. This covers registration, title assignment, and the cost of license plates. While this is a government fee, the dealer can provide this onsite so that you do not need to go to your local DMV. How the registration fee is calculated depends on the state you live in. Some registration fees are a simple flat rate, but sometimes they vary. States may base their fees on the following:

  • The weight of the vehicle

  • The price of the vehicle

  • The age of the vehicle

  • The horsepower of the vehicle

Additionally some states charge extra if your car is electric. This is mainly to offset the fact that you will not be paying the gas tax.

Documentation Fee

The documentation fee covers all of the paperwork that the dealership must do to complete your sale. This fee will vary greatly from dealership to dealership. Some states have limits to how much a dealership can charge for a “doc fee”–for example Minnesota has a $100 doc fee limit–but most states do not, so this cost can be very high. There is no doc fee limit in Florida, so the median doc fee is nearly $900. 

While you cannot negotiate a doc fee, you can keep it in mind when negotiating the price of the car. Be sure to negotiate more aggressively to offset additional costs. And keep in mind that sales tax is charged on the doc fee as well.

Sales Tax

While this is not a fee per se, it might be an unexpected cost for some. You will have to pay sales tax on the total price of the car plus the documentation fee. This will vary from state to state, but can add a lot onto the total cost of the car. If you buy a car for $35,000 in a state with 8% sales tax, that’s an extra $2800. 

In some states you may get a tax break if you are trading in your old car. If you trade in your car for $15,000 and your new car is $20,000, you would only have to pay tax on the difference of $20,000. This will depend on where you live.

What other costs will you have to pay when buying a car?

In addition to the fees above, there may be a few other fees that pop up in your car buying journey.

Market Adjustment

Some dealers might mark up prices on their inventory because of supply and demand. Since we are in the middle of a vehicle shortage, dealers might put an addendum sticker on the price of each car. They are essentially saying that a particular car is in high demand, so they are raising the price to increase profits. You are not required to pay this fee and can try to negotiate, but the dealer also doesn’t have to sell you the vehicle for the sticker price. 

Advertising Fee

Some dealers will charge what they call an advertising fee. They claim this covers the cost to advertise the sale of that particular car. Try to negotiate this fee down–there is a lot of room for negotiation with these types of discretionary fees.

Other Dealer Fees

Your dealer may charge other fees in addition to the standard fees. Fees for shipping or dealer prep can be found in many contracts. Always ask the salesperson if you are unsure what certain fees are for, and try to negotiate them down if you can.

Addons and Upgrades

If you are buying a new car, you will have a lot of options for upgrading. From a nicer trim level to added safety features, there are a lot of added features that can run up your car bill:

  • Anti theft devices

  • Window tinting

  • Key protection

  • Paint and fabric protection

  • All season floor mats

  • Chrome plated wheels

  • Blind side protection

  • Cargo trays

  • Splash guards

  • Wheel locks

  • Rear seat entertainment system

  • Nitrogen filled tires

  • Leather seats

  • Interior ambient lighting

  • And much more

There are seemingly endless options when it comes to what you can add on to your car. But some of these can come with a serious pricetag. A rear seat entertainment system can easily run you an extra $2000, while window tinting can add an extra $400 to your car’s bill.

It’s a good idea to consider which ones you want and which ones you can live without. Also think about what add-ons you can do yourself. A dealership will charge you $300 for fabric protection, but you can scotchgard your own fabric for less than $10.

How can you save money when buying a car?

With all of the added costs of buying a car, it’s important to try to save money where you can. Here are some of our top tips for saving money when buying your car.

Know How Much You Can Afford Before You Start Looking

Go through your budget and determine exactly how much you can afford to spend on a new car. A good rule of thumb is to keep your car’s sticker price below 20% of your annual pre-tax income. So if your household annual income is $150,000, try to keep your new car’s sticker price under $30,000. 

Be Flexible With What You Want

With today’s vehicle shortage, it might be hard to get the exact car that you want. Patience and flexibility are key here. If you have your heart set on one type of car, you will need to be patient and know that it might take months of searching, and you still might not wind up with what you wanted. If you can be flexible on the make and model, you will have a much more successful search.

Scour The Internet For Deals

One of the best things about today’s technology is that you can find deals all across the country. The car of your dreams might be on the other side of the country, but it can still be yours. Sometimes a deal will be so good that even with shipping costs, you make out ahead of the game. Here are just a few sites where you can find the best deals:

  • Autotrader

  • Cars.com

  • Carvana

  • Enterprise

  • CarsDirect

  • TrueCar

  • Vroom

  • Cars.com

Be sure to check your local dealers and local papers as well. You never know where you will find the best deals.

Negotiate As Much As You Can

It’s hard to negotiate a lot when there is a vehicle shortage. But that doesn’t mean you shouldn’t try. After all, a customer who is ready to pull the trigger is better than a hypothetical customer down the road. Try to negotiate on the cost of the car, the doc fees, advertising fees, marketing fees, and any other additional fees they might list in the contract. And if they are unwilling to negotiate, you can decide if the total cost is worth it. You can always walk away if you decide the answer is no.

And that’s what you should expect to pay when you buy a car.

Buying a car can be very expensive. From the unavoidable costs (like sales tax) to the optional costs (like tinted windows), the price can easily keep ticking up. But it’s important to remember that you are the customer, and as the customer you ultimately have the choice to buy or walk away. If you choose to buy a car, make sure you can afford to do so and that your budget will allow it.

If you already bought your car but are still looking to save some money, consider refinancing your auto loan with Auto Approve. Refinancing can save you a lot of money in the long run–we’re talking hundreds if not thousands of dollars. If your credit score has increased or the market rates have decreased since your original financing, chances are you will qualify for a lower car loan APR.

Get your free quote from Auto Approve today to find out just how much you can be saving!


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