Why You Should Think About the Total Cost of Buying a Car, Not Just the Sticker Price

If you are in the market for a new car, you probably are focused on one or two numbers: the monthly payment and/or the sticker price of the car. But buying — and owning — a car is about a lot more than the number on the contract that you sign at the dealership.

In reality, there are a variety of other costs that go along with purchasing a car that can really add up — leaving you spending quite a bit more money that you had originally planned for when you first set out to buy a car.

That is why it is important to have a broader understanding of the total cost of buying and owning a car before you head to the car lot. When you factor in these added expenses, you will have a better idea of what you can truly afford — and will be able to comfortably make your car payments without struggling each month.


A major expense for most people is the expense of financing a car loan. Most people cannot afford to purchase a car outright; with the cost of a new vehicle ranging from $15,000 to $30,000 and beyond, the majority of Americans need to finance their cars in order to purchase them.  That means that they will need to take out a loan — either from a bank or directly from a dealership — in order to pay for their vehicle.

When you finance your car, you will be paying interest on top of whatever money you’re borrowing. Interest rates are rising, which means that it is now more expensive to borrow money than it was in recent years.

Currently, the interest rate for a new car loan is around 4.44% on average, while the interest rate for a used car is approximately 4.93%. Loan terms for new cars are now longer than ever before, with the average loan for a new car now as long as six or seven years. That means that you will be paying interest on a car loan for years — which can substantially increase the total cost of buying a car.

Taxes and Fees

Every year, you will be required to pay a number of fees in order to keep your car legal to drive in your state. This may include a registration fee, a fee for your license, a fee to have your car inspected or your vehicle emissions tested, or other taxes.


In every state, you will be required to purchase car insurance in order to drive. Depending on your state, the type of car that you drive, your accident history and driving record and other factors, such as your age, the insurance company will determine your insurance premium.

You could pay as little as $500 per year to well over $1,000 per year — or even more. For example, if you drive a fast sports car or have a history of speeding tickets or car accidents, then your insurance company will likely charge you a higher rate for your insurance. But if you have a clean driving record and drive a minivan, chances are good that your insurance rates will be lower.

Be aware that just because you may pay a good rate now doesn’t mean that it will not rise later on.


You won’t get far in your new ride until you fuel up — which makes gas an unavoidable part of the car owning experience. Of course, the amount that you spend on fuel will largely depend on the type of vehicle that you purchase. A large SUV will cost a lot more to fill up than a smaller sedan, and an electric car will save you even more on your fuel costs each year.

Tires, Maintenance and Repairs

Staying safe on the road means taking care of routine maintenance. This can include anything from replacing your tires on a regular basis to getting oil changes and having routine maintenance performed to keep your car in good condition. According to AAA, the average annual cost of owning and driving a vehicle is nearly $9,000.

You should also be prepared to pay for larger expenses that may arise from time to time, like replacing the brakes. While you may not expect to do these types of repairs with a newer vehicle, having a fund set aside for car expenses can help to cover these costs as they arise, especially if you are purchasing a semi-retired car.

The true cost of owning a car is a lot more than simply the sticker price or the monthly payment.  Figuring in how much you will spend each month on other expenses — such as $150+ on gas or $100 a month on insurance — will help you get a better picture of just how much it will cost you to own the vehicle of your dreams.

From guest blogger Marcus Santiago, a car enthusiast and blogger who loves buying fixer uppers and flipping them for a profit.

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3 Responses to “Why You Should Think About the Total Cost of Buying a Car, Not Just the Sticker Price”

  1. Carissa malen says:

    I generally adhere to the blogs of this internet site. I actually like the material subject and also pointers. The rate of interest for a brand-new car loan is around 4.44% generally, while the rates of interest for a made use of the car is around 4.93%. So leaving you investing a fair bit even more cash compared to you had actually initially prepared for when you initially laid out to purchase a vehicle.

  2. Richard Boyd says:

    What would be the cost of insurance if insurance companies were to change their advertising?
    Advertising aimed at crash reduction. Less emphasis on entertainment and cost comparison.
    Incomplete cost comparison. How much of the insurance premium goes to executive pay and stockholder dividend?
    How much of the premium is dedicated to crash reduction. Compared to how much is dedicated to reducing claim pay out?
    Education aimed at crash reduction. Starting with public disclosure of geographic locations with highest paid claims.
    Treating crash deaths as a public health issue?

    • John Carr says:

      An insurance company does not have an incentive to invest in general road safety because the benefits are spread out among all insurers and the costs are borne only by that one insurer. Instead they are using “black box” type event recorders. Those affect behavior of people whose conduct the insurer is liable for.

      You might imagine the government would be in a good position to improve road safety, but the government would rather run speed traps. Driver’s ed costs money, speed traps make money.

      Analyzing insurance company finance is tricky. Massachusetts regulators spent a lot of time arguing with insurers even when the basic facts were not seriously disputed. Because insurance companies need to have financial reserves, much of their income is from investing those reserves. If an investment has a good year, is the company gouging drivers? You can spin the numbers that way, and that was the Attorney General’s job.

      In some states, including at least Massachusetts and Texas, people can consult an online database of reported crashes.