It’s taken you a while but you’ve finally found a car that you’re interested in buying. Likely relieved that you’ve reached this moment, you’re ready to sign on the dotted line and drive off the lot in your brand new ride. If you’re going to make this dream a reality, however, you’ll need more than a down payment, a signature, and a handshake to drive out of the dealership. Budgeting for these costs that aren’t covered by your auto loan or down payment is important if you’re going to buy the car you want.
The Dealership Matters
Though there isn’t any way around getting charged the fees associated with purchasing a car, you can reduce your out of pocket expenses by choosing the right dealership. If you live in Constitution and you were looking to purchase a Cadillac, for example, you should compare Cadillac dealerships in Atlanta Ga or near your home to determine who has the better rates. You can also check consumer reviews and inquire with sales reps about common fees associated with purchasing a car to get an idea of which dealership will offer you the best overall deal.
Depending on where you live and if the car is new or used, you’re going to be charged fees. These fees can include but aren’t limited to:
- emissions testing
- floor plan
- dealership preparation
Some of these fees are self-explanatory and minimal like the vehicle registration, title, and license fees. However, other fees may seem strange and cost more. Take, for instance, the “floor plan fee” which is charged as a result of the dealer keeping the car in inventory for you to purchase. Delivery and destination fees are charged for vehicles that have to be shipped to your location. Some dealerships charge an advertising fee for the cost of marketing the vehicle to you. They may be small individually but these costs add up to a significant amount of money that you’ll need to be ready to cover.
Where you purchase your car and the amount the vehicle is worth will determine how much you’re expected to pay in sales tax. This portion is not covered by your down payment or auto loan, unfortunately. If you were purchasing a vehicle that was $30,000, from a state where the sales tax is 7%, you’d be on the hook for approximately $2100.
When you’re just about to sign on your financing offer with the dealership, chances are you’ll be offered additional services. These services can, in some cases, be instrumental in keeping your car ownership costs low. However, these services may need to be paid upfront or they’ll be tacked onto your auto loan, increasing your monthly payments and extending the term of your loans. One of these add-on services might include credit insurance which is used to cover the cost of payments should you be financially unable to make the payment yourself. Another might include extended warranties and service contracts which are commonly offered for used cars since they have a higher chance of needing service in the near future.
Unfortunately, you won’t be able to take your car off the lot if you don’t have adequate insurance coverage. Depending on the type of vehicle you have, your credit history, and your driving record, this could be several thousand dollars required upfront to the insurance company. If your vehicle is being financed, auto loan providers typically require you to obtain full coverage insurance on both new and used cars. This is to protect the vehicle in the event that it is damaged while you’re repaying the loan. When shopping for insurance, make sure that you’ve done your research so that you make the most informed decision.
Some dealerships will accept your trade-in with an offer, but charge you a fee. The trade-in fee is attached as a means to cover the cost of making your vehicle marketable for resale. The fees will vary by the dealer but should be expected if you’ve traded in your vehicle.
All too often, car buyers make the mistake of assuming that the only costs they’ll have when purchasing a vehicle is the down payment. Though your auto loan will cover the cost of the car and warranties (in some instances), it doesn’t handle everything. Save yourself the embarrassment and the hassle by making sure you have this money upfront.