The type of vehicle you buy determines how much you’ll pay for a car. And certain categories of vehicles cost more than others.
This is how much a new car costs to buy as of 2022, based on information from AAA and Kelley Blue Book:
When you’re looking at vehicles, check to see if there are any car rebates available from manufacturers that could help you save money on the average car cost.
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Other Costs Associated With a Car Purchase
As you’re determining how much does a car cost, keep in mind that the average cost of a car goes far beyond the sticker price of the vehicle. Factor these additional car costs into your budget to make sure you can afford them.
Insurance
Your insurance premium depends on a number of factors, such as your age, sex, credit score, driving and accident history, vehicle make and model, and where you live.
The riskier your driver profile, the more you’ll generally pay for insurance. Drivers who have been in accidents or gotten speeding or traffic violations tend to pay higher rates. Teens and young adults are typically charged the highest insurance premiums. Men often pay higher rates than women. And those with poor credit scores may pay more for car insurance.
Shop around and get quotes from different insurance companies to get the best rate.
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Dealership Fees
The amount you might have to pay in fees could be as much as 8% to 10% of the cost of the car. There are two types of dealership fees, mandatory and optional.
Mandatory fees that you have to pay include:
- Documentation fee — Thiscovers the cost of the paperwork drawn up for the sale of the car, and the amount varies by state. Some states put a cap on the fee, while others don’t.
- Destination charge — This is a federally regulated fee that covers the freight charge for getting the car from the manufacturer to the dealer. The fee is based on the make and model of the car.
- Inspection and emissions fee — Cars are required to undergo a safety and emissions inspection in many states. The dealership does the testing and the buyer pays the cost, which generally ranges from about $7 to $40.
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Optional dealership fees
- Market adjustment — Dealers may charge fees that put the car over the manufacturer’s suggested retail price (MSRP). You can try to negotiate them down.
- GAP insurance Guaranteed asset protection (GAP) covers the price difference between your car’s value and what you owe on your auto loan if the car is stolen or totaled. It could be helpful to have if you’re upside down on your car loan. If GAP insurance interests you, shop around. Some car insurance companies offer it and you may be able to get a better price.
- Extended warranty — This warranty is intended to kick in after the manufacturer’s warranty expires. Carefully read the terms and conditions to see exactly what’s covered and how long the coverage for each item lasts. You may decide you don’t need it.
- Tire and wheel protection — This covers tire and wheel repair costs due to damage from potholes, nails, and other items. Consider the price of the protection and the likelihood of such damage happening to help figure out if it’s worth it for you.
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Sales Taxes
In most states, you’ll need to pay sales tax on your new car. Rates vary by state and can range from 2% to about 8.25%. To put it in perspective, 2% sales tax on a $30,000 car is $600. And 8.25% sales tax on the same car is $2,475.
In certain states, sales taxes may also depend on the cost or weight of the vehicle, with more expensive and heavier vehicles paying a higher rate.
Five states — Alaska, Delaware, Montana, New Hampshire, and Oregon — have no sales tax on cars.
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Title and Tag Registration
The cost of a car title and tag registration varies by state and type of vehicle. The registration fee may be a flat fee or it might vary based on the car’s value or the county you live in. It may include license plates for your vehicle, but this isn’t the case in every state. For the title, you’ll pay a title transfer fee to transfer the ownership of the car from the dealer to you.
Check with your state’s Department of Motor Vehicles (DMV) to find out what the registration and title fees and requirements are in your area.
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Interest Rate
If you finance the car cost, you’ll pay interest on your car loan. Car loan interest rates depend on such factors such as your credit score, income, the length of the loan, and the current federal interest rates. The interest rate is calculated and then applied to your monthly principal loan payments.
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Principal Balance
The principal balance on a car loan is the amount that remains after you make a down payment on the car. That’s what you pay off each month, plus interest, over the length of the car loan.
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Refinancing an Existing Car Loan vs Getting a New Car
Given the price of new cars, plus all the car costs and fees involved, you may decide that it makes sense for you to hold off on a car purchase right now. In fact, it could be more cost effective for you to consider refinancing the auto loan you have for one with better terms.
Refinancing means replacing your current car loan with a new one to ideally get a lower interest rate, more manageable monthly payments, or both. Refinancing could be a good option if your credit has improved since the time you took out your original auto loan. Finding out what interest rate you can qualify for is what to ask when refinancing, along with determining what your new monthly payment would be.
To make sure the process goes smoothly, it’s a good idea to make yourself familiar with the ways to refinance a car loan. Then you’ll have everything you need in hand when you apply.
However, if the car you currently own is older, needs costly repairs, or if you’d like a newer model with better safety features, trading in that car for a new one might be the right option for you. This could be beneficial if you opt for a less expensive car, or if you can get a loan for the new car that has a lower interest rate.
When deciding whether to refinance an auto loan or trade in your old car for a new one, weigh the advantages and disadvantages of both options. For instance, with refinancing, consider the interest rate on the loan, the length of the loan, and your monthly payments. Qualifying for a lower rate could potentially save you hundreds of dollars or more. But if your old loan has a prepayment penalty, that could add to the cost of refinancing. Read your loan contract carefully to see what the prepayment penalty involves, if there is one.
With a trade-in, you’ll get a new car with new features, and the deal can typically be done quickly. However, it’s important to note that with a trade-in, you’ll likely get 10% to 15% less for your old car than its estimated value. And factor in all the additional fees and taxes you’ll have to pay on top of the new car’s sticker price, which can add up.
In the end, the decision is up to you. Think about which method will get you the best deal financially as well as the car that’s best for your needs.
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The Takeaway
With the rising cost of new cars, plus the fees and taxes involved, buyers need to calculate whether purchasing a new car or refinancing the car they already own makes the most sense for their situation and budget.
If buying a new car seems out of reach right now and you’d like to explore refinancing options, Lantern can help. Just fill out a simple form and you’ll receive offers from multiple lenders in our network.
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This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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