When researching what car you want to buy, the cost is likely a significant factor. However, there’s far more to the cost of ownership than the sticker price and resulting monthly car payment. Here are 10 hidden expenses to be aware of when buying a car.
- Sales tax: Most states have a sales tax, which applies to any goods purchased there, including cars. The sales tax rate in Texas is 6.25 percent, so that’s what you can expect to pay on top of the sticker price when buying a car.
- Dealership fees: Dealerships often tack on fixed costs to the final bill of sale. These may include a delivery and handling charge, documentation fee, vehicle prep charge, or advertising fee. If you don’t agree to pay these costs, the dealership could terminate the agreement.
- Dealership upsells: You may be offered a service package, extended warranty, paint protection, or other extras you weren’t planning to buy when you walked into the dealership. These add-ons are sometimes worthwhile, but do your research before accepting any upsells.
- Interest: Assuming you take out a loan to buy your car, you’ll have to pay interest to the lender. This is lumped in with the rest of your car payment, making it hard to tell how much you’re actually paying.
- Leasing charges: If you lease your car rather than buy it, a fee equivalent to an interest rate is tacked onto your monthly lease payment. You’ll want to shop around for the best lease rate you can find.
- License and registration fees: New, unregistered cars come with temporary tags, which you must replace with permanent license plates within 30 days. Registration fees are due once a year, and the amount you pay varies by county and the type of car you drive.
- Insurance premiums: Insurance coverage is the second-highest cost of buying a car after the purchase price. Your rate depends on where you live, the features of your car, your age and driving history, and other factors.
- Gas: This ongoing cost can add up over the years, which is why many car shoppers are drawn to fuel-efficient vehicles.
- Maintenance and repairs: Newer cars don’t require as much maintenance as their older counterparts, but you should still plan to spend a few hundred dollars on tune-ups and repairs every year.
- Depreciation: After about five years on the road, the average car loses more than 50 percent of its original value. This hidden cost only matters if you plan to sell your vehicle eventually.
While buying a car comes with hidden expenses, it also provides transportation freedom and financial benefits. For instance, once you have paid off a chunk of your vehicle, you may qualify for a car title loan. This is useful for overcoming any financial emergencies that come your way. If you’re interested in borrowing money against your car, contact VIP Title Loans to learn more. We have six convenient Texas locations to serve you.