Consider the hidden costs
The decision to buy a new car isn’t an easy one, but driving is a necessity for most people. If you are in the process of buying a new car, you’ll want to consider all the financial implications of that decision. Buying a new car is exciting, but it is a significant commitment, and often comes with hidden charges and fees that could break your budget. We’ve collected a few of the most common hidden expenses of buying a new car, so you’ll be informed and prepared when you step into the dealership.
Financing Fees
During the process of purchasing a new car, you’ll run into financing costs. These are the costs associated with taking out a loan, and, will become your monthly payment. When shopping for a new car, you’ll want to consider the interest rate being offered, and the amount of your down payment. Experts suggest putting down larger down payments to cut down on your monthly expenses. You will also want to consider the interest rates you're being offered. New cars offer lower interest rates than used cars, and rates will vary between financing companies and dealerships. Experts suggest doing some research on the cars you are interested in and going in with a general idea of the monthly payment you are willing to make each month. Going in with a budget can prevent you from getting too attached to a vehicle that is simply out of reach.
Taxes
Different states, counties, and even cities have different tax rates for large purchases like cars, but some states will require you to pay the tax rate within your city to discourage you from heading across state lines to buy a vehicle. Before you make a decision to drive interstate to score an excellent deal with a lower tax rate, you will need to research the taxes in your city, and whether or not your state requires you to pay the sales tax in the state or city where you currently reside. Driving an hour to find the car of your dreams probably isn’t the most cost-effective option if you'll need to pay taxes in your city of residence, anyway.
You will also need to decide if you wish to pay the taxes on your vehicle at signing or if you would like to roll it into the payments. Some dealerships will roll the taxes and tags into your payments, but experts suggest paying such fees up front. They can add up quickly, raising your overall monthly payment. Additionally, you’ll be paying interest on the taxes, as well.
Insurance Premiums
Everyone knows that once you purchase a car, you have to pay for insurance, but what a lot of people don’t count on is how their vehicle choice and personal choices factor into the amount of money they pay each month for insurance. Car insurance can differ up to $100 per month simply because of the trim level you choose.
Cars that are driven by men under the age of 25, single individuals, and those with poor driving records will cost significantly more to insure. Likewise, a vehicle that is performance-oriented (basically anything touted as a sports car) will cost significantly more to insure than your run-of-the-mill sedan. Before you set your sights on a particular car, consider using an insurance comparison tool, available on several websites for free, to compare the average insurance on each model you are interested in. You’ll be surprised how much you can save by picking a different car model.
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