Looking for a new car? Before you roll off the lot with a new (or new to you) set of wheels, it’s important to understand all the factors that contribute to the total cost of car ownership.
Read more: How Ally Bank’s smart savings tools can help you save for a new set of wheels
8 total costs to consider when purchasing a car
When it comes to estimating the true cost of buying a vehicle, understanding these factors can limit surprises and help you budget more accurately.
While you can budget for routine maintenance like oil changes, tire rotations and fluid checks, an emergency fund can help cover unexpected issues like engine problems or broken parts.
1. Initial retail price
The actual price of the car is often the most significant expense. If you’re taking out a loan to purchase your new vehicle, here’s how to locate a dealer who offers Ally auto financing.
2. Sales tax
While most states have sales tax, some counties, cities and municipalities also add their own sales tax to the state rate, increasing the overall cost.
3. Dealership fees
To cover the administrative costs associated with processing the paperwork for the car sale, many dealers include various documentation fees in the final price.
Ongoing costs
Along with upfront costs and fees, you should also consider these recurring costs:
4. Registration and title fees
These charges vary by state and will likely need to be renewed annually. Some dealerships impose fees based on the vehicle’s value, while others charge a flat fee.
5. Monthly financing charges
If you finance a car, you’ll have to make a monthly payment, which includes both the principal and the interest accrued each month.
6. Auto insurance costs
The type of car insurance you need varies by the laws in your state, the value of your vehicle and your personal preferences.
7. Fuel Costs
When factoring in the price of gas, consider your daily commute and the amount of gas you use per week.
8. Routine Maintenance and repairs
While you can budget for routine maintenance like oil changes, tire rotations and fluid checks, an emergency fund can help cover unexpected issues like engine problems or broken parts.
Factors that can impact the cost of buying a new car
The total price of your car can also depend on several factors.
Make and model
Some brands and styles are more desirable than others and tend to hold their value better, which can lead to higher prices.
When should you buy?
The day and month you buy a car can significantly impact prices, availability and dealer incentives. In general, the best time to buy a car is during months that fall at the end of each quarter: March, June, September and December as well as Mondays and holidays.
Current interest rates
Your credit score, the type of vehicle and the loan terms all determine interest rates. Since a poor credit score can result in higher interest rates, it’s important to build and maintain good credit to access more favorable loan terms.
Offering a larger down payment can also result in lower interest rates. Start setting aside money for your down payment in an Ally Bank Savings Account.
Desired loan term
Even if your monthly payments are lower, a longer loan term means you’ll pay interest for a longer period, resulting in a higher total cost for the car. A shorter loan term can be paid off faster, meaning you’ll likely pay less interest and reduce the overall cost.
Personal driving habits
How you drive can impact the cost of car ownership, particularly maintenance and insurance expenses. Rapid acceleration, harsh braking and aggressive cornering can lead to premature wear, potential breakdowns or even accidents.
The road ahead
Buying a car is an exciting yet significant, financial commitment. Knowing the total costs of car ownership can help you make an informed decision that fits your budget and sets you up for a smooth ride.
