You just passed your driving test and you’re ready to hit the open road with new wheels. Before you start looking for your first car, you need to consider all the costs of auto ownership.
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Transcript:
Welcome to Money Tip Tuesday from the Making Money Personal podcast.
New drivers are excited about the newfound freedom that comes with a drivers’ license, but to really experience true liberation you have to have your own vehicle. We just went through an auto purchase with my 18-year-old daughter who needed a car for college. Here’s what we found out: the sticker price is only the beginning.
Once you know your budget, you can do online searches through third-party apps like CarMax, CarGuru, AutoTrader—the list goes on and on. I would tell you it’s a quick search, but it’s not. We spent weeks searching for the right vehicle online. I knew the make and model of the car we were looking for and, with some online searching, I soon realized my budget was unrealistic unless I wanted an older vehicle or one with a lot of miles.
When I mentioned that the search results were producing vehicles from three states away, my older daughter suggested I look at some used car lots in a town nearby—this area is notorious for small used car dealerships. I knew I didn’t want to drive 5 hours to look at a car I might not buy, so I searched used car dealerships in that town. This search produced a list of eight used car dealerships. At this point, I just went to each dealerships’ website to see what they had for inventory.
We found the perfect car and made an appointment to look at it. The following day we arrived after school and were notified the car had already been sold. While we disappointed, we were optimistic we could find a good car with this dealer. My daughter and I were invited to walk the lot to see if there was another vehicle that would be a good fit for her. We found it and took it for a test drive!
Now here’s where it gets interesting. The sticker price for the car was $8,500. The dealership fee (which is a fee the dealership must pay to our state is $250) so now the price is $8,750. I have purchased three cars within the past two years and every dealership, no matter the size, must comply with this fee, which means it’s passed on to you, the consumer. If you buy from a private seller, you shouldn’t have this additional cost.
Before we left the lot, we added insurance on the car. I made a quick call to my insurance company, which is national insurance provider, and added the car to my policy. There was an immediate payment due of $224, which is part of the prorated premium for the current insurance period.
The next step is to register your car. This is a trip to the DMV, which I would pay $1000 for someone to do for me; actually, that’s an exaggeration, I would pay someone at least $100. In any case, you don’t have to pay anyone to go to your local DMV, but you do need to register your car. The cost of registration varies and is based upon the age and weight of your vehicle. I’m not aware of the actual formula, but for my daughters 2016 Nissan Versa sedan the registration cost for state and city was $180. For newer, heavier vehicles, like a 2022 pickup, the registration costs will be much higher.
You will also need to have your car inspected, which is about $50 depending on where you live and where you have your inspections done. If you’re buying a car from a dealer, the dealership will do the inspection, so the vehicle has an updated inspection sticker.
OK, so let’s add up our numbers: price of car ($8,500), plus dealership fee ($250), plus insurance ($224), plus registration ($180), plus inspection ($50) is $9,204. Since my daughter’s car had the inspection sticker, the true cost of purchasing her car was $9,154 -- $654 above the sticker price. This may or may not be important, depending upon your income or budget, but these costs are something to remember and consider before you purchase that first car.
That’s today’s Money Tip. If you have any other tips that could be helpful to other listeners, let us know at tcupodcast@trianglecu.org. Be sure to check out our other tips and episodes on the Making Money Personal podcast and follow us on Facebook and Instagram.
Thank you to our sponsor, Triangle Credit Union, and thanks for listening.
Have a great day everyone!
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