What are the different hidden costs involved in buying a car rather than the invoice price?

What are the different hidden costs involved in buying a car rather than the invoice price?

If you are new to car buying then you must know that there are plenty of other things to consider but the main thing is these hidden costs that come when you buy a car. After the negotiation of invoice price, you sit down with the dealer to discuss other things that are going to cost you in which some are evil i.e. necessary to pay like tax and some are optional like warranties.

Here are different costs that may occur when you buy a new or used car.

Financing Cost

If you are buying the car in cash then it doesn’t exist but if you are taking an auto loan for that then there are financing charges. The actual amount of these charges depends on the cost of a loan based on the interest rate. The interest rate of cars depends on credit score, type of cars, and terms of the loan. If you want to save money on financing charges then do a larger amount down payment and don’t settle until you get the best price.

Sales Tax

When you buy a car whether it’s new or old you have to pay sales tax. the charges depend on where you live approximately all states take sales tax between the range from 2% to 8%. Ask dealer or tax authority to find how much tax you have to pay then set it in your budget.

Title and Registration Fees

To drive a car legally it has to be registered in your name so you have to pay some fees for registration and licensing. Many dealerships handle this they will take the money and submit it to the state motor vehicles agency. If you want to do it on your own you can do it.

Dealership Fees

Dealers do all your paperwork for that they charge you some documentation fee that is the processing fee for them to complete the paperwork. Dealers may charge for the preparation fee for the car which includes a car wash and oil check and delivery charge if you want your car to be delivered from the manufacturer and they may be an advertising fee also. These all fees are negotiable so, feel free to discuss it.

Car Insurance Cost

The insurance is a necessary investment as if any miss happening thing happens to your car you don’t have to pay for hundreds or thousands of expenses that all will be covered in your insurance. There are different insurance plans exist all you have to do is to find an ideal plan for your budget; giving a rough idea will cost about $1600 per year.

Extended Warranties

Dealerships will offer you extended warranties or maintenance plans it’s up to you if you want them as these are optional service and you may be able to negotiate with them.

Service Plan

A service plan is a prepayment of service costs for a specific duration; these are not hidden but their true cost can be. If you are planning for having that car for a long period then it will be a great deal otherwise it is not so opt for it wisely.

Extra Protection

Dealers offer extra protection for many items like paint, rust, and even for fabric but you don’t need them all so, be extra careful while option these as it will make the overall cost more.


Vehicles need regular maintenance like oil changes, tire rotations and they cost money so keep them in your list of the monthly budget. The older the car is more its expenses for maintenance and repairs.

GAP Insurance

General Asset Protection or GAP insurance covers the difference between a car loan and the value of the vehicle if it is totaled or stolen. When you leasing a car you may need to purchase it but when you are buying a car it is optional.