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6 Hidden Costs of Buying a Car


Are you in need of a new or used car? If you are responsible with your finances, odds are that you are searching for the best car that meets your needs (or wants) for the best price. After all, you don’t want to overpay for something. That would be like throwing money down the drain. Yet, when most of us go to purchase a car we don’t consider many of the hidden costs of buying a car. We often just look at the price of the car or perhaps the monthly payment.

Learning how to be debt free starts with making a smart choices when it comes to your finances. It means doing your research and being prepared. A car has a lot of other expenses associated with it than just the sticker price, and failing to consider the hidden costs of owning a car could leave you going into debt. I’ve already talked about why depreciation should be considered when buying a car, but what else should you consider when buying a car? What makes one car a better than the other?

6 Overlooked Expenses in Buying a Car

Whether you realize it or not, there are at least six commonly overlooked expenses that can affect how much you are really paying for the car. Making sure to compare these additional fees will allow you to make the best decision when it comes to finding the right car.

Financing: Are you going to finance the car? If so, you should consider the percentage rate of the loan that you are eligible for. Taking this into consideration is important because the age of the car can make a big difference on the total cost of the car. Getting a new car that is eligible for 0% financing might be a better option than buying used in some situations. Don’t assume this is the case though. Make sure to do do your homework.

Insurance: Have you talked to your insurance agent to estimate how much it will be to insure this new or used car? Different years, makes, and models have different rates when it comes to insurance. Odds are that a sports car is going to be more expensive to insure than a vehicle geared for a “family,” but you never know until you ask.

Maintenance: Have you considered the expected maintenance fees? To calculate maintenance issues, make sure to include not only the age of the car (maintenance fees increase with more years of use), but also consider whether it is foreign or domestic. While my wife and I thoroughly enjoy our Volkswagen Passat, the price to do repairs is slightly more expensive than a domestic vehicle. It doesn’t mean you should avoid foreign vehicles all together, but it is something to consider.

Fuel: Does the car require a premium grade of fuel or perhaps even diesel fuel. This is often overlooked cost, but having to pay $.10 or $.20 more per gallon can add up over several years of use.

MPG: With the recent trend towards increasing the miles per gallon in newer cars, this is being considered more and more these days. People are beginning to realize that a car with better gas mileage will save them money on fuel. Yet, don’t let this trick you into paying a lot more for a car just because it gets good gas mileage. While it is an important factor to consider, it should not be the sole factor.

Tires: Last but not least, make sure to consider the cost to replace your tires. If you are buying a used car, inspect the tires to calculate how long it will be until you have to replace tires. An important tip to consider is that SUV’s and trucks often cost more to replace the tires than a car. This is one of the reasons I went with a station wagon over an SUV. Why pay for the image of a car, when its more practical to buy the alternative?

The next time you are considering buying a car, make sure to take these factors into consideration to make sure that you are getting the best value for your money. It may force you to avoid the car of your dreams and buy a practical car, but your bank account will be better off as a result.

What other expenses do you consider when buying a car?

This post was written by Corey, a staff writer from 20’s Finances. He’s currently writing a series on Jobs in College, where he discusses the benefits of working while in school.



My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. These are all the costs that I try to consider. I can’t think of any more off the top of my head. Some like maintenance can be difficult to predict on a car by car basis, but financing, insurance, and fuel related expenses should be a relatively straightforward calculation.

    • I agree CFM. Some are much easier to calculate. I try to do as much research and read up on any major maintenance issues before making a purchase.

  2. We bought our car cash and never looked back. We did the research and already had great insurance… Speaking of insurance I should do a post on how to get lower insurance if you are single. My brother and I are good at getting great rates. Now that I am married my rates just had to be tweaked to be great.

    • That’s a great idea for a post Jai. I can’t wait to see it. 🙂

  3. Pretty good list. When I buy a used car I also check the JD Power reliability ratings. If you are looking at more than one car these give a good comparison. And I also check out safety ratings – not directly a cost, but still helpful when comparing.

    • That’s a great suggestion. Thanks for sharing Kris.

  4. I would definitely check what your insurance might be. We just insured a new car and it barely raised our insurance from $40, however we were thinking about getting a motorcycle first.

    The motorcycle would have cost OVER $200 a month to insure. Insane.

    • wow – that’s expensive. I’m glad I don’t have to insure a motorcycle.

  5. Thanks for sharing the info, i really appreciate it.I can’t believe the amount of money you will have to pay after purchasing a brand new car, its ridiculous.

    • You’re welcome Paul. I agree. It can be pretty expensive.

  6. We have five kids and recently went from a minivan (23 miles/gal) to a conversion van (14 miles/gal). We realized the cost difference, but went through with the purchase anyway. Our insurance went down, comfortability went up and of course fuel consumption went up. All in all, it was a good buy because we sold our minivan for 1,900 more than what we paid for the conversion van.

    • not bad at all – It sounds like you figured out the savings instead of just going with popularity (MPG these days)

  7. In California, license plates are tied to the value of the car. A $20K car can have license plates that cost $4-600 per year. This a huge increase versus my renewal of $100.

    • oh wow – that can be quite expensive. Another reason to go cheap.

  8. Depreciation is also another factor to consider. Consider the following scenario:

    Car A, costs $20,000 after 8 yrs it is worth $2,000
    Car B, costs $20,000 after 8 yrs it is worth $9,000

    I would suggest Car B is a better value, when it comes time to trade it in or sell it you will get more money for the car.

    • I couldn’t agree more – in fact, that’s what inspired this post (my earlier post on depreciation). It’s always important to take into consideration the resale value.

  9. I buy used. 3-4 years prior to current model year. I want to pay cash so the biggest expense I focus on is cost. I want to also know that general maintenance is standard. For example…some imprt vehicle have rather unique sized wheels. Unique size means only avail at dealership which means expensive.

    • It sounds like we think a lot alike! 🙂

  10. I’d add to the list:
    Be sure to test-drive and see the actual car first, before buying it over classified ads over the newspaper / internet, handing over money when it could be dodgy!
    If you’re going short distances, try riding a bike – great for health and good for the environment too!

  11. Oh, man. Cars are so expensive .I financed mine simply because I didn’t want to deplete my EF, and I didn’t have enough in there anyway. My car broke down and I had to get a new one, and the gas and insurance is what really kills me.

  12. It amazes me how many people overlook the cost of insurance. When I am considering a car, the first thing I do is check out how much it will cost me to insure.

    I have friends that complain how much their insurance is and when I ask if they checked it out prior to buying the car, I get a weird look.

  13. I, too, am surprised when friends buy cars without checking into the insurance costs. I think tires should also be a consideration; honestly, cars versus trucks, tires cost a lot more for a truck. Of course, gas absolutely MUST factor in, given the high (and rising) prices of gas nowadays!

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