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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.


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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*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 6.24% 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.
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