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What is the real total cost of owning a car

What is the real total cost of owning a car?

Vehicle ownership costs go beyond the obvious. And in most cases, it’s the costs that people feel that they have factored in properly, when in fact they didn’t, that end up being the real unexpected car expenses to consider. Uncovering the true extent of hidden vehicle ownership costs is about mastering the basics such as successfully negotiating a good purchase price and landing great terms on your car loan, plus being aware of the myriad of unnecessary expenses dealers will try to burden you with for their profit.

Since car ownership costs include every single dollar you spend on your car, vehicle depreciation, hidden maintenance costs, and insurance premiums make up some of the biggest expenses. Let’s see how you can avoid overspending and still drive home a reliable car that meets all your needs and expectations. 

Going to the dealership unprepared will cost you a lot of money

The worst thing you can do when looking for a car is to do so unprepared. And nowhere is the lack of preparation going to cost you more than while visiting a car dealership.

A common misconception is that car dealerships make money just by selling cars. In reality, they also profit from selling you extra services that you don’t actually need, by taking care of the paperwork needed to complete a car sale, and by offering you sub-par financing terms so that lenders pay them a hefty commission.

Dealers like to group things together to create confusion and hide fees, upsells, and overpriced goods and services behind their smoke screens. Do you want to uncover the hidden costs of vehicle ownership? Begin by being aware of the car-buying process and by making your interaction with any car dealership completely transparent.

Here’s how you can make sure that you’ve lowered your total cost of owning a car, before paying a cent for it.

Know the current prices

Starting with the obvious, you should always get a good feel of the market before visiting a car dealership. It’s vital that you know what similar models to the one you’re interested in go for, and what level of equipment you can expect for the money. Go online and check prices at Kelley Blue Book or Edmunds.

If you’re going in without having a solid grasp on how much you should pay for the car that you’re interested in, then you’re just inviting trouble. Car salesmen generally work on commission so it’s in their best interest to keep the vehicle’s price as high as possible. Or better said, as high as you’ll allow it.

You won’t be considered an easy target if you come across as being an informed, assertive prospective buyer. And that buys you a better car shopping experience with dealers less likely to use pressure tactics on you. That being said, you should treat dealers with respect and don’t expect to be able to drop the price too much below the market average. 

Research prices from other dealers

If you want to secure the lowest total price of owning a car, you need to adopt the concept of variety. The more variety you give yourself access to at every stage of your car-owning journey, the better. And it starts with buying the vehicle in question.

Try to get offers from at least three different car dealerships, because you never know what’s happening behind the scenes. One dealership might need to improve its cash flow, so they’ll be more likely to give you a discount. Or they might have gotten the car for a great price, and they don’t like to hold onto inventory. There are a million possible scenarios you can encounter, and that’s why you should put yourself in a position where you can access different deals from different dealers.

Know what you can negotiate 

Price isn’t the only thing up for negotiation. And the things you leave unaddressed will add up to the hidden vehicle ownership costs over time.

You can also negotiate the services that will be included with your purchase such as free maintenance for a limited period, or free roadside assistance. Some dealerships even offer free satellite radio trials or preferred financing for certain models.

The best thing to do before visiting a car dealership is to go on the internet and research what services they offer and what deals other car buyers were able to get. In doing so you’ll increase the chances of getting more value for your money or saving some bucks in the future. Or both.

Get pre-approved for a car loan

Uncovering hidden vehicle ownership costs means addressing every single aspect of car ownership. And even though car financing is hugely important in determining how much you’ll end up spending on your car, you’ll be surprised by just how little attention people pay to it.

We’ve dedicated an entire blog post to getting preapproved for a car loan, but here’s the gist of it:

  • Get offers from multiple lenders, consider traditional banks, credit unions, and online lenders
  • Pit lenders against each other to get the best rates
  • Make sure to limit your rate shopping to a 14-day window to minimize the impact on your credit score
  • A preapproval transforms you into a “cash buyer” in the eyes of dealers everywhere, so you’ll speed up the buying process and get access to better deals
  •  Ask your dealership if they can offer you better loan terms than the ones you already have

Getting preapproved for a car loan not only ensures that you’re getting the best deal out there for your needs but it also prevents you from being tricked by the dealership into signing a horrible financing deal. It’s something that happens way too often, only because people fail to consider the fact that APRs are one of the hidden costs of owning a car.

Getting upsold 

A hidden cost of owning a car is paying for features that you don’t need. Even though it’s an obvious expense, people tend to look at the fact that they were upsold by the car dealer as something they agreed to, rationalizing it into something enjoyable. It’s not exactly a scam if you end up with something useful or semi-useful for the money, right?

And hardly anyone thinks of being upsold as one of the hidden vehicle ownership costs. But the truth is that every expense associated with a car does go into its total cost of ownership. A dealer can easily increase the price of your vehicle by 10% by shoving unnecessary services and features down your throat. It pays to pay attention and stand your ground.

Don’t get car insurance from the dealer

Again, an obvious car-related expense, car insurance can take many forms and if you’re unprepared, you’ll likely end up overspending and increasing your total cost of ownership, for no good reason.

The “hidden” costs of car insurance largely manifest in two ways:

  • Not knowing what type of insurance is suitable for you. Every driver needs minimum liability insurance, but maybe full coverage doesn’t make sense for your needs. Know the main types of car insurance before you buy a car.
  • Signing the first deal presented to you. Just like with car loans, you should shop around for better rates. Get at least three offers before you visit the dealership, it’s very unlikely that they’ll have the best insurance premiums on the market. 

Fees You Don’t Actually Need To Pay

If knowing what and how much to negotiate or making sure that you always have more than one offer on hand when it comes to car loans and car insurance are some of the more subtle hidden vehicle ownership costs, here are some of the most straightforward ones. 

Just to be clear, we’re not saying that these services are useless. They might serve your needs, but you should make an informed decision to add them to the total cost of owning a car, not have them added for you by default.

Documentation fee

One of the most useful extra services when buying from a dealership is the fact that they can take care of the paperwork for you. It takes a few documents to complete a sale plus you also need to register the car and send the car’s details to your lender, if you’re applying for a car loan.

A dealer can sort all of this for you, in exchange for a fee. Some states have a cap on how much dealers can charge their customers for handling the paperwork, but even so, depending on where you live and the dealership you’ve chosen, you can expect to pay anywhere between $50 and $600 for this service. It might be a price worth paying so that you don’t have to deal with the hassle of visiting the Department of Motor Vehicles (DMV) yourself to register the car and get your plates.

Reconditioning or cleanup fee

One of the worst hidden fees out there when buying a car, a cleanup fee is exactly what the name tells you – dealers will clean up used cars before they sell them. It’s something that dealerships shouldn’t force you to pay for but sometimes they do. Be aware of this fee and ask for it to be removed from your out-the-door price if you discover it’s been added.

Destination charges

This fee unfortunately can’t be avoided as all manufacturers charge for the shipment of their vehicles and you’ll have to foot the bill. Dealerships almost never include this in the sticker price, though, so ask about it before you commit to a final sale price.

Government fees and taxes

Another set of fees and taxes that you can’t avoid are the ones requested by the authorities. You’re probably considering the title and registration fee but there can be other unexpected car expenses to consider here.

In some states, you’ll have to pay property tax for your vehicle, a tax that will be proportional to the value of your car. Car sales tax differs widely across the US with some states such as Montana, Oregon, and New Hampshire asking for 0% while the sales tax you’ll owe in Kansas is a whopping 7.5%. The national average stands at 5.5%, so research your state’s taxation level before you start shopping for a car. 

Advertising fees

Dealers spend money on advertising their inventory and they sometimes try to pass some of those expenses on to you. Dealers should either tell you about an advertising fee beforehand or they should drop it altogether. If you were not told about it from the start, and you see this fee suddenly pop up when you’re ready to sign for the car, have the dealer take it out.

Fabric and paint protection

Another set of strange dealership fees that can find their way into the final price of your car are the fabric or paint protection fees. If you don’t ask for these specifically, don’t pay for them, no matter what the dealer tells you. Modern paint is created to last for a long time with no added protection needed. And the same goes for the fabric on the inside of your car. Make sure not to leave the vehicle in the sun for too long and you should be fine.

Undercoating and rustproofing

Two hidden fees that you should check for, both unnecessary and costly. Modern cars are designed to last, and they should do just fine in any weather conditions without the dealership’s undercoating or rustproofing. 

VIN etching

It’s worth mentioning that all cars already have their VIN codes stamped on multiple body parts (under the windshield on the driver-side of the dash, driver-side doorjamb, or the door itself, etc.). That being said, you could be looking to etch your VIN on other parts of the car as well, which is not a bad idea. But it is a bad idea to let a dealership do it for you – you’ll likely spend a few hundred dollars when you can either buy a kit online for less and do it yourself or ask your mechanic to sort it out for a fraction of the dealership’s price.

GAP insurance

GAP insurance (Guaranteed Asset Protection) covers the difference between what your insurance company will pay to replace your vehicle if you total it or it gets stolen, and your outstanding loan balance. Considering that cars are notorious for being rapidly depreciating assets, that gap can be quite high, especially in the first years of a car’s life. It’s a useful extra service that can be bought at any time. You don’t have to buy it the second that you purchase the car, and you’ll likely get far better quotes from insurance companies outside the car dealership.

Extended warranty

Extended warranties sound great on paper – they are designed to offer drivers extra protection and peace of mind. Even though the term can mean many things in practice, it’s likely that buying an extended warranty is a bad idea.

According to Consumer Reports, most drivers never have to rely on their extended warranty, and those that do end up saving less money than they’ve spent to get the added warranty. That is because extended warranties, in practice, are exceptionally overpriced and just a tool for dealerships and auto clubs to turn a profit.


When it’s all said and done, the biggest expenses you could be facing as a car owner come down to how you treat your car. Negligence, be it skipping scheduled maintenance or driving like there’s no tomorrow will catch up with you in the end and you’ll see evidence of it in your bank account.

The good news is that this is a variable that you can control. Treat your car right and chances are that it will not only retain its value better over time but it will also require just small repairs to serve you well. Less depreciation and fewer maintenance costs make for a lower total cost of ownership.

Many hidden car ownership costs hide in plain sight and many more are things that you’d never catalogue as such. For example, going to a dealer completely unprepared, not knowing the price range for your desired model, or without having been preapproved for a car loan, will likely cost you a lot of money. Upselling techniques and a lack of offer variety when it comes to car insurance will also up the price of your purchase and add to the total cost of owning a car. But hardly anyone considers being unprepared as one of the hidden vehicle ownership costs.

Then there are the sneaky fees and add-ons that you should be aware of – anything from GAP insurance to destination fees to extended warranties, etc. They all add up and before you know it you could be looking at a two-digit increase in the price you thought you’d pay for your car.

Understanding hidden vehicle ownership costs is a matter of preparation and checking the fine print, do both and you could be saving thousands of dollars every time you buy a new or used car.


What is an example of a hidden cost for a car?

There are many but some of the biggest ones are – car depreciation due to negligence, lack of variety when it comes to auto loans and car insurance, and dealership add-ons (gap insurance, extended warranty, cleaning fees, etc.).

What extra costs are there when buying a car?

The car’s sticker price makes up for about 85-90% of the total final price. You’ll also owe taxes, insurance premiums, and dealership fees.

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