The True Cost of Buying A Car

The True Cost of Buying a Car: 5 Common Costs and How to Cut Them Down

Just like the true cost of buying a home may be higher than you expected, the long-term cost of buying a car can be staggering. Here we look at the typical costs to finance, register, maintain and upgrade a car, as well as some great ways to  save money.

#1. The True Cost of Buying a Car – Financing

For most people the first step to buying a car is to apply for a loan. Through this process you discover how your credit score affects your interest rate.  A high credit score can save you hundreds, if not thousands, of dollars over the course of the loan.

Further, sales tax, licenses and fees typically equate to an additional 10% of the car’s value. 

Here’s an example of how these fees are calculated and the total cost of ownership with both good and bad credit.

Financing a Car With Good Credit

Vehicle Price$30,000Total Loan Amount $27,519
Loan Term60 MonthsTotal of 60 Payments$29,867
Interest Rate3.27%Total Loan Interest$2,348
Down Payment($5,000)($5,000)
Sales Tax7.23%Total Sales Tax$2,169
Title, Registration etc.$350$350
Total Cost to Own$34,867

Financing a Car With Bad Credit

Vehicle Price$30,000Total Loan Amount $27,519
Loan Term60 MonthsTotal of 60 Payments$38,299
Interest Rate13.86%Total Loan Interest$10,780
Down Payment($5,000)($5,000)
Sales Tax7.23%Total Sales Tax$2,169
Title, Registration etc.$350$350
Total Cost to Own$43,299

Ways to Save Money

As you can see from the data above, clearly the best way to save money on vehicle financing is to maintain excellent credit.

Alternatively, you can avoid financing costs altogether by paying for your car or truck outright. Sure you may not have $30,000 to drop at once, but if you can scrape together $12,000 to $15,000 your used car options will be plentiful.

I “self-financed” my last car purchase with about $13,000 and fortunately I didn’t have to sacrifice quality, safety or comfort. My Dodge Journey was previously a company fleet vehicle, and thus lightly used and only two years old when it was retired for newer, better Subarus. You can find similar deals if you look hard enough. Start your research on reputable websites like TrueCar and Autotrader.

As a bonus, my Journey came loaded with safety and comfort features, albeit with an engine that makes going uphill from a cold start feel like riding a lawnmower through sand.

#2. The True Cost of Buying a Car – Registration

The cost of vehicle registration for an average priced ($30K), fairly new car is increasing. It recently cost me $350 to title and register my 2015 Dodge Journey, with a $13 fee for using my credit card. Serves me right for refusing to carry cash.

In some counties, for instance Los Angeles County in California, you can expect to pay far more for registration, and buying a luxury vehicle will add to the cost further.

Ways to Save Money

Buying an old car can cut down the costs for obtaining a title and registrationHowever, missing out on modern safety or comfort features to avoid this annual fee is likely not a great trade off. Bite the bullet and write it off on your taxes, if you itemize deductions.

#3. The True Cost of Buying a Car – Maintenance & Repairs

Repairs, insurance, fuel, oil changes, cleaning, parking, and tolls are too often overlooked when considering the real cost of car ownership.

Average operating costs vary from state to state and driver to driver. An IRS National Consensus shows an average monthly cost of $203 for vehicle operating expenses in Cleveland and as high as $343 per month in Miami for a single vehicle.

Ways to Save Money

Doing your own oil changes, interior cleaning and car washes is a great way to cut down some of the financial burden. Furthermore, if you use the car for business purposes you may deduct the entire cost of operation.

Other considerations:

  • Calculate your total monthly vehicle expense by adding the prospective cost of maintenance and repairs to the cost of the loan;
  • Don’t visit the dealership for out-of-warranty repairs  and maintenance;
  • Use coupons and seasonal deals to maximize value when visiting the mechanic for routine maintenance;
  • Buy a car with good gas mileage and a record of reliability;
  • Learn how to do basic upkeep like changing batteries, adding washer fluid and checking your oil levels.

#4. The True Cost of Buying a Car – Depreciation

You’ve likely heard it before, but one minute after you leave the car lot your car loses roughly 11% of its value. During the first five years the car will depreciate by 15%-25% each year. After five years the car is worth 37% of what you originally purchased it for.

Ways to Save Money

You can take advantage of depreciation by picking up a used car for cheap. Gone are the days of shady used car salesmen slinging hoopties. Well maybe not gone, but the used car market is now filled with highly reliable, low mileage vehicles less than 5 years old, selling for a fraction of the price that a new car would cost.

And if you use the car for business, you can account for depreciation on your taxes, over a five year period.

#5. The True Cost of Buying a Car – Upgrades and Accessories

Upgrade/ AccessoryTypical Cost
New Tires$125 Per Tire
Paint Job$500-$1,000
Window Tinting$100-$300
Sound System$300-$500
Reupholstering$200-$750 Per Seat
Cold-Air Intake$50-200
Brake Pads$100-$300 Per Axle
Lift Kit $1,200-$2,000

Ways to Save Money

Avoid the majority of accessories offered at the dealership and opt for after-market products to save up to 50%.

Also, consider whether your truly need those 22 inch rims, or flame-inspired paint job. Modern cars come standard with most of the things you would ever need in a daily driver. Many of the other upgrades and accessories will only be noticed by you and even then, only briefly. Stick with the essentials.

Is there anything I missed? Let me know below.


  1. The registration and oil changes always get me. It sucks because those are two costs that stay fairly the same no matter what vehicle you have. I know some people put off oil changes, but they’re a necessary part of car maintenance, so that’s not for me. I think the key to saving on a car is to buy a quality used car with cash. The car payments are really what will eat into your monthly finances.

    1. Thanks Mrs. Picky Pincher,

      I was truly shocked that the price for title/registration was about half the cost of what I sold my previous vehicle for! Also, in regards to oil changes, I used to get them every 5000 miles but have since learned that modern cars only really need oil changes every 8K-10K miles. I know it depends on the type of oil, type of car etc. I also definitely agree on buying a used car with cash! That’s exactly what I did and I find that I am now obsessed with maintenance and upkeep.

  2. One thing I learned from another blog a while back, is that when you are at the store (or car lot) you are comparing many product side by side, whereas once you take the product home, you do not have the side-by-side comparing anymore. The example the blog used was with speakers, where the sales person was trying desperately to up-sell a higher end product. “Listen to this…now listen to this! So much clearer/fuller/etc right?” But that was only clear if you do an immediate comparison. Once you have it at home, surely you lose the huge appreciation and impression you had at the store.
    Anyway, it took all my willpower to admit that many things I wanted in a new car was because I was comparing all of them side-by-side. This one is cooler, that one has that, whatever. But, what do I really need in my next vehicle? It’s nice to have all the bells and whistles, but I’m also paying for a mortgage and child-care.
    Also, I bought used, but I was still blown away by the inflated registration in my county!

    1. Thanks Matt,

      In my last vehicle purchase I didn’t have the burden of comparison thanfully. I just had a take in or leave it option, which really helped me narrow down my choices, so to speak.

      My ex-Altima was acting up so I had to act fast. My biggest decision was whether to get a loan or to pay it off as soon as possible. I looked at the loan paperwork and reviewed the extended warranty, The additional $500 Tire Warranty …? And the interest on the loan over 5 years and just decided to pay it off asap.

      I dropped the warranty too; we’ll see in five years if that was a good decision but I suspect I would save more by paying out-of-pocket, than the $2,900 warranty with interest.

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