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The Real Cost of Buying a Car: How Much Cash You Need to Buy

Finance | 07/07/2022 22:00
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We see the commercials all the time–shiny, new cars driving in the desert or on the mountaintops, with the words “starting at $30,000” plastered across the bottom of the screen. But just how accurate is the starting price that is listed? What is the real cost of buying a car?


Let’s talk about the real cost of buying–and owning–a new car.

Woman calculating the real car buying cost


What is the real cost of buying a car?

It’s easy to think that the sticker price on the car is what you will pay when you decide to buy a new car. But it’s not quite that simple. In addition to the price of the car, you will have to pay additional fees, add-ons, and sales tax.


Additional Fees

When you buy a new car, there are a number of fees that you may be required to pay on top of the price of the car. 


First up is the documentation fee. This is the fee the dealership charges for their paperwork and processing. Some states have limits to how high this fee can be, while others leave it up to the dealership. Documentation fees can run anywhere from a few hundred dollars to a few thousand dollars.


The vehicle registration fee is another added cost when buying a car. This covers the cost of registration, title assignment, and license plates. While this fee is charged by the state (and the amount will vary from state to state), dealerships can process everything in-house to save you a trip to the DMV. The vehicle registration fee will vary from state to state and be based on a number of factors, including the weight of the vehicle, the price of the vehicle, the age of the vehicle, and the horsepower of the vehicle.


Depending on the dealership, they may have additional fees that you are required to pay. Advertising fees, shipping fees, and dealer prep fees may also be found lurking in your contract. You can try to negotiate these the best you can, but they can add on a significant chunk to the cost of buying a car.


Add-Ons

There are a number of add-ons that you may select that will cause your sticker price rise. From entertainment systems to security features, there are a lot of ways the cost of your car can increase drastically. Common add-on features include:

  • Window tinting

  • Key protection

  • Paint and fabric protection

  • All season floor mats

  • Blind side protection

  • Wheel locks

  • Rear seat entertainment system

  • Leather seats


These additional features can add hundreds, even thousands, to your car’s total cost. If you have your heart set on any of these features, do some research beforehand to see how much you will be shelling out (and make sure it’s worth it to you).


Sales Tax

It’s easy to forget about the sales tax when it comes to purchasing a large item. But sales tax on a $30,000 car is a significant additional cost. If you were to buy a $30,000 car in Pennsylvania where the sales tax is 6%, it would be an extra $1800.


What is the real cost of owning a car?

Once you have the keys in your hand and your foot on the pedal, that’s it, right? Unfortunately, no. The costs of car ownership continue throughout your car’s life.


Maintenance and Repair Costs

No matter how great your new car is, it will require routine maintenance and a few repairs here and there. If your car is under a warranty, some of these costs may be covered for the first few years (typically 36,000 miles or three years, whichever comes first). But beyond that you should expect to pay for the following routine maintenance:

  • Oil changes

  • Tire rotation/replacement

  • Alignments

  • Air filter changes

  • Change radiator coolant

  • Change brake fluid and power steering fluid

  • Wiper blade replacement

  • Brake pad replacement

  • And much more


All of these maintenance costs can add up pretty quickly and may or may not be covered by your warranty. And there are always unexpected repair costs that will pop up here and there. Be sure to have an emergency fund so that you aren’t left in a tight spot.


Insurance and Inspection

Throughout the life of your car you will be required to get it inspected routinely and keep it insured. The cost of inspection varies greatly from state to state and may be of no cost to you. 

The cost of insurance depends on a few factors:

  • State Requirements

  • Age

  • Car Make and Model

  • High-Risk Violations

  • Yearly Mileage

  • Credit History

  • Driving Record

  • Zip Code

  • Marital Status

  • Gender


It will also depend on how much coverage you want to have. If your car is financed or leased, there may be insurance requirements for you to follow.


Financing Costs

In addition to the actual cost of the car, you will also have to consider the cost of financing (unless you are buying with cash). The two main additional costs are the cost of interest and the origination fees.

The interest you pay on your car loan can add up to a lot of money over time. If you purchased a car for $35,000 with no down payment and a 6% APR over 36 months, you would pay an extra $3,332 in interest over the life of the loan. This is why car loan refinance is so important. Whether you got a bad deal in the first place, or your credit score has improved since your initial financing, car loan refinance can save you a lot of money.


In addition to the cost of interest, you will have to pay origination fees when you finance your car. Origination fees are basically the commission on a loan (they can also be referred to as acquisition fees). Origination fees are usually calculated as a percentage of the original loan, between 1% and 2% of the principal amount. On a $35,000 car with a 2% origination fee, it would be an extra $700 tacked onto your financing. 


How can I reduce the total cost of a car?

You should aim to spend less than 15-20% of your take home pay on car costs (this includes all of your gas and maintenance too). Keeping to this rule will help you avoid overspending and overextending your budget. If you are looking to cut your car costs, there are a few steps that you can take to do so. 


Resist the add ons

Adding a fancy sound system or all weather mats onto your new car may seem like a good idea at the time, but it can quickly add up. Resisting the pricey add ons will save you money on the total cost (plus if you are financing, it will save you on the interest of those costs).


Refinance your car loan

Refinancing your car loan can save you a lot of money in interest over the life of your car. Car loan refinance can save you money in a few ways.


If you refinance your car loan to a lower car loan APR, you will save money on interest in total. While that $35,000 car would cost you over $3300 at a 6% APR over 36 months, that same loan would cost you 2,200 over 36 months if it had a 4% car loan APR. 


Refinancing your car to a shorter repayment period will also save you money in the long run. Reducing your repayment period from 48 months to 36 months will save you 12 months of interest, which can add up to a lot of savings. In addition, lenders usually offer lower rates to people who have shorter repayment periods. 


If your credit score has improved since your initial financing or if market rates have decreased, it’s probably a good idea to look into car loan refinance.


Change insurance companies

Lowering your car insurance payments is another way you can greatly reduce your monthly car costs. Different insurance companies base their premiums off of different factors, so it’s important to look around and compare all of the companies and rates. Lowering your insurance rates can add up to a lot in savings.


Maintain your car

The more diligent you are about routine maintenance, the less likely you are to have a costly repair down the road. Keeping to a maintenance routine will help your car stay healthy for longer and keep the repair bills at a minimum.


And that’s everything you need to know about the cost of buying–and owning–a car.


Buying a car is expensive, and so is owning a car. But knowing what you are getting into can help you prepare mentally and financially for the expense. Remember that you can always try to negotiate some of the upfront costs and rates. 


If you already have a car that is financed, refinancing your car loan can help save you a lot of money in the long run. Contact Auto Approve today to talk to one of our experts and get the ball rolling. The sooner you refinance, the sooner you can start saving. So don’t wait–get your free quote today!


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Should You Rent A Car on Vacation? 5 Things to Consider

Do you need to rent a car on vacation?It’s a complicated question, and there’s no one size fits all answer. However, there are a few important details you can and should take into account if you’re on the fence about renting a car on your next holiday.In this short guide to car rentals for vacation, we’ll look at:Your destinationYour travel planYour travel companionsYour vacation habitsAnd your budgetWith these things considered, you should have a clearer picture of whether or not renting a car is right for your getaway. And hey, remember – this is a good problem to have, it means you’re going on vacation!5 Things That Determine Whether You Need A Car On VacationWhether or not you want to drive on holiday is a personal decision. Ultimately, this choice can affect the kind of trip you have, so choose based on the vacation you want. 1. Where You’re GoingYour destination is a huge factor in deciding whether or not you need a car at all. For example, consider the following:Is it somewhere you’ll need to drive to get around? Is it somewhere with robust public transpo and limited parking? Do they drive on the same side of the road? What are your plans for meals – will you need to buy groceries?If you’re going to an all-inclusive resort, or a major city where parking will be expensive and difficult and public transportation is the standard way of getting around, a car might only slow you down. If you’re renting a ranch in Montana or roadtripping through mountains, you’re almost certainly going to want not just a vehicle, but one that can handle inclement weather and rough terrain.And if you’re going somewhere like Ireland or England where they drive on the other side of the road (or if you’re coming to the U.S. or Canada from, for example, the U.K., India, or Japan), even if having your own transportation might be convenient, you might want to look at buses and trains to lower stress and keep you safe.2. How You’re Getting ThereThere are different considerations for taking a road trip vs. flying somewhere.If you’re taking a road trip, you might consider taking your own car rather than getting a rental. This is certainly cheaper, and if you’re driving somewhere close to home, taking your own car is a perfectly good option. The biggest reasons to rent a vehicle for a road trip are:If your car is old or has limitations that’ll make it uncomfortable or more likely to break downIf you know you’ll need to handle terrain or weather your vehicle isn’t well-suited forIf you’re going somewhere far enough from service stations that a breakdown could mean a major trip interruptionIf you’re driving from Boston to Southern Maine, renting a car feels a little silly – you’re close to home, you’re not changing terrain, and you’ll be surrounded by auto shops the whole time. But if you’re driving from Boston to the Grand Canyon, the idea of getting a broken down car back home becomes a much bigger deal. A rental might be more expensive, but if you’re renting with a national company, it may be easier to simply replace a vehicle in the case of an emergency than wait for one to be fixed when you’re several days’ drive from your home and your destination. Of course, that’ll depend on your breakdown coverage and your rental agreement, so read the fine print on everything carefully as you weigh your options.On the flip side, if you’re flying to your destinations – say you’re off to see the rainforests of Costa Rica – renting a car will likely be your only choice, if all the other factors align and you decide a car is, in fact, necessary.3. Who You’re Going WithBig family? Solo travel? Your adventuring party makes a big difference in your transportation needs. If you’re backpacking on a budget alone across Europe, you might be willing to put up with a lot of minor inconveniences to save money. 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What You Like To Do On VacationAnother thing to think about is the kind of vacationer you are. Some people like to stay close to home, or stick to eating at restaurants and strolling around urban sites. If that’s you, cabs and walking might be more than sufficient for your needs. But for the outdoorsy, those who love beach days, national parks, and driving into the woods, a car can be a must-have. When you picture yourself on vacation, what are you doing? If you prefer to split the difference, you can always rent a car just for a day or two rather than for the whole time, to save money.5. Your BudgetMaybe one of the most important factors in all of this is what works for your wallet. 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A car is not always the right choice for every person and destination. Hopefully, with all of the above in consideration, you’ll be able to figure out the right steps for you and your next trip!Another good next step to take?Finding out how much you could save by refinancing your vehicle with Auto Approve! Most people are paying more than they need to be on their monthly car payment, thanks to dealer markups. If you got your loan through dealership financing, if rates have gone down, or if your credit has gone up, refinancing may be able to save you money both monthly and in the long run with a lower interest rate.Getting a quote only takes a few minutes, no commitment and no hard credit check required.Get your free quote now.

When Should I Refinance A Vehicle?

When should I refinance my vehicle?It’s a common question, and there’s no definitive, one-size-fits-all answer. Instead, it depends on you.The refinancing process can lower your monthly payments and help you get out of debt faster. But should you refinance your vehicle right now? If you're thinking about it, here are some things to consider:Is your auto loan term nearing its end?Are you struggling with high monthly payments?Have interest rates gone down?Has your credit score gone up?Do you want a lower interest rate?If the answer to any of these questions is yes, now may be the best time to refinance your vehicle. Let’s take a closer look.Here’s How You Know When to Refinance Your VehicleConsider these factors to decide when to refinance your car loan.Your Existing LoanWhere and when you got your existing loan – and the details of that loan – are all among the deciding factors in whether you’ll be able to find a better deal. It’s worth noting that, if you got your loan through dealership financing, the odds are very good you could save money by refinancing, as dealerships often add mark ups to their rates.When thinking about whether or not to refinance your car loan, it is important to know the current interest rate and term of your loan. You should consider the amount of time left on your loan and any prepayment penalties.Prepayment penaltiesPrepayment penalties are fees your lender charges you for paying off the loan before it is due. Watch out! Some lenders will not refinance loans that have prepayment penalties attached. That said, even if your current loan has a penalty attached, it may still be worth it for you to refinance. In some cases, you may be able to save more by refinancing than the cost of the penalty. This is especially true if you got a particularly bad rate on your existing loan (which frequently happens when you buy a new car directly from the dealer). Time remainingIf you have several years left on your current auto loan at an unfavorable rate or your existing loan has high fees, refinancing may be the right decision. After all, refinancing your car loan can be a great way to save money on interest and get lower monthly payments.If you refinance your loan to a longer term, you’ll likely be able to lower your monthly payments – but you could end up paying more in interest. On the flip side, if you can refinance at a lower interest rate and at a similar or even shorter loan term, you’ll be able to save money in the long run. (That’s one of the things that makes refinancing so great!)Your Credit ScoreYour credit history is one of the biggest factors in being able to refinance with most lenders. If you have good enough credit, then refinancing your car could save you money.Refinancing can be a great option if you have improved your credit and want lower monthly payments or to get a longer term on your loan. Better credit can also qualify you for a lower rate than you initially received so that you can pay less overall, regardless of whether or not you want a lower monthly payment.The only thing worth noting when it comes to your credit score is that you’ll want to avoid refinancing multiple times, as doing so could hurt your score, and rates usually go up with each refinance. Your Cash FlowMany people are looking for ways to reel in their budgets. If your income has gone down or you want more money in your pocket for added expenses, refinancing your auto loan could make sense for you. Doing so can lower your monthly payments and help save some cash, without having to change or get rid of your vehicle.Refinancing offers tons of potential savings and can be helpful for people who have limited cash flow. For example, if you’re unemployed and need money in your pocket right away, refinancing can lower your monthly payments and even give you the option to take a few months off from making a payment.Before refinancing your car loan, make sure you refinance for the best possible price. Shop around and compare offers before signing any paperwork to make sure you’re saving as much as possible. 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Many things go into making the decision to refinance your loan, but this article should help you know better what to look for. For many people refinancing can help you save money monthly and pay less over the life of the loan. The good news is, getting a free quote is easy! There’s no commitment or credit check to find out what rates you might be eligible for, and when you decide to refinance, an AutoApprove agent will help make sure you find the best deal for you and then do the paperwork for you, making refinancing quick and easy. So, whether you’re on the fence or ready to dive into refinancing, get your free quote now.

Top 4 Ways to Get a Lower Monthly Car Payment in 2025

How can you get a lower monthly car payment?When money is tight, or you're hoping to make a big purchase, every penny counts. Whether you're trying to save up for something big, looking to put more money where it matters, or cutting back in leaner times, lowering your expenses can help.That means, when you're going through your budget, you may want to figure out where you can save a few dollars. For many people, a car payment is one of the bigger bills they pay each month. If that's the case for you, lowering your car payment could be the answer to your financial challenges.Whether you need a temporary fix or a long term solution, there are tons of great options out there to help you secure a lower monthly car payment.Here are the four best ways to get a lower monthly car payment1. Talk to your lenderLenders are in the business of making money, and they only make money when you make your payments. You may be surprised to learn that many lenders are willing to work with borrowers to help them manage their payments more effectively.They may allow you to skip a payment or lower your payments temporarily. Keep in mind that interest will still accrue during this time, but it is always better to defer and have this accumulate than to have missed payments. Missed payments can trigger late fees and hurt your credit score. You want to avoid the negative credit impacts that will occur without deferment.That said, not all lenders are magnanimous, and they'll rarely want to cut a deal that doesn't benefit them in the end, so while you may be able to skip a payment or lower your monthly cost, you may end up paying more interest in the long run if you go this route.2. Refinance your carRefinancing can lower your monthly car payments in a number of ways and is likely to be your best option to effectively and sustainably reduce your monthly payments. Since refinancing benefits both you and your new lender, it's a win-win – they don't need to make more money than your current lender, so you're more likely to get a deal that'll cost you less overall. Here's how.You can get a lower interest rateOne of the main benefits of refinancing is securing a lower APR. There are several reasons you might be able to get a better interest rate this time around.You didn’t get a good deal on your original loan. If you went in to look for a car and got talked into dealership financing, there's a good chance you got stuck with a higher-than-necessary APR. In this case, refinancing is likely to lower your APR significantly and cut your payments drastically.Interest rates have dropped. Interest rates fluctuate based on how the economy is performing. If you bought your car while rates were high, there’s a good chance you are eligible for a lower APR if you refinance.Your credit score has improved. If your credit has improved since you first bought your car, you are probably eligible for a much lower rate. Your credit score is the most important portion of your application, and an improvement in credit can yield a drastically better interest rate.You can lengthen your repayment periodEven if you are not eligible for a lower interest rate, refinancing can still reduce your monthly payments by changing your repayment schedule. If you lengthen your repayment period (for example, from 36 months to 48 months) your balance will be paid over a longer period of time and your payments will be lower. Keep in mind you will be paying more interest overall, as you will pay interest for 48 months instead of 36 months, but it will drastically reduce your monthly payments.You can add a co-borrowerWhen you refinance, you can add a co-signer to your loan and possibly reduce your interest rate and secure better terms. If your co-borrower has good credit, they will be eligible for a better interest rate. If refinancing sounds like a good option for you, Auto Approve can streamline this process and help you start saving money today. We work as your advocates to get you the best rates possible, then do the paperwork for you..Want to know more about Auto Approve? Click here to find out why Auto Approve is the best way to refinance your auto loan.3. Sell Your CarIf you need a more permanent solution than talking with your lender will provide, and refinancing isn’t an option, you might need to consider a new set of wheels. You can either trade in your car to a dealership or sell the car on your own.Almost all dealerships will accept trade-ins and can put you in a car that will have lower monthly payments. Make sure you talk to the dealership and are upfront about what you can and cannot afford. You can also choose to sell the car privately. This is a bit more work than going to a dealership, but you will probably get more money for your car. If you want to sell your car on your own, be sure to clean your car very well, get good pictures, and make sure maintenance records are up to date. You want to make your car as attractive as possible to increase the amount of money you can make.Whether you sell to a dealership or to a private buyer, be sure to know three things before starting this process:How much you owe. Know how much money is left on your loan balance, and how much you need to sell the car for in order to break even.How much your car is worth. Go to Kelley Blue Book or Edmunds to look up the value of your car. It might be worth more than you think and you don’t want to lose out on money that could be yours.What you’ll do for transportation next. If you plan to replace your current vehicle with a less expensive one, make sure you take time to look at the market and find vehicle options that’ll fit your needs before giving up your car. Vehicle prices have fluctuated drastically over the past 5-10 years and are likely to shift again with changing car tariffs. If you won’t be replacing your vehicle, have a backup plan for how you’ll get around and test it out for a week before making the change.4. Lease a Car InsteadIf you have sold your car but still need to get around, getting a lease instead of purchasing a new car might be a good option. Leases are generally cheaper than buying a new car, as you are only paying for the depreciation that accrues during your use. There are three main leases you can pursue:New Car Lease – This is the most common type of lease and is widely available. You typically need pretty good credit and a down payment to secure a new car lease.Used Car Lease – These are not as common as new leases but they are out there if you do your research. The APR might be a bit higher, but since the car is not worth as much you might have lower payments than if you got a new car lease.Lease Takeover – This occurs when someone wants to get out of their existing lease for one reason or another. Websites like LeaseTrader.com and SwapALease.com provide a space for you to shop around for a lease takeover. Some people who are desperate to get out of their existing leases may even offer cash incentives, making this a good option if money is particularly tight. You will still need to go through an application and credit check, but you can probably secure a nicer car for a lower rate than if you were to get a new car lease.And those are our top tips for lowering your monthly car payment!In times of economic uncertainty, budgeting and saving money is incredibly important. If you are struggling to make ends meet every month, consider one of the options above.And if refinancing seems like the right option for you, or you want to find out just how much refinancing could lower your monthly payment, Auto Approve is here for you. All it takes is a few clicks and to get a quote and get on your way to more money in your pocket and less on your vehicle payments.GET A QUOTE IN 60 SECONDS
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*APR and Fees Disclosure: Auto Approve works to find you the best Annual Percentage Rate (APR), which is based on factors like your credit history, vehicle and desired payment terms. Fees to complete your loan refinance vary by state and lender; they generally include admin fees, doc fees, DMV and title. Advertised 5.49% APR based on: 2019 model year or newer vehicle, 730 minimum FICO credit score, and loan term up to 72 months. All loans subject to credit and lender approval.
Auto Approve has an A+ rating with the BBB and is located at 5775 Wayzata Blvd, Suite 700 #3327 St. Louis Park, MN 55416-1233. Auto Approve works to find its customers the best terms and APR, which are based on factors like credit history, vehicle, and desired payment terms. Loan amounts, costs, and fees vary by state and lender; they generally include admin fees, doc fees, DMV, and title fees, depending on the lender and period of repayment. There is no fee to obtain a quote and all refinancing-related costs are included in the amount financed so there are no out-of-pocket costs! For more information, please go to AutoApprove.com.