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How Much Does It Cost to Buy a Car? – Car and Driver


How Much Does It Cost to Buy a Car? – Car and Driver

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How Much Does It Cost to Buy a Car? – Car and Driver

According to Kelley Blue Book, the average transaction price (ATP) for cars in August 2022 was $48,301, a new record. Vehicle inventory has improved since the pandemic, but demand and prices are still high. Hyundai, Honda, Land Rover, and Kia have the highest sale prices over the manufacturer-suggested retail price (MSRP). Supplies of the subcompact cars, SUVs, hybrids, and electric vehicles these brands specialize in are low. On the other hand, Ram, Lincoln, Volvo, Alfa Romeo, and Fiat often have prices slightly below MSRP because they have high inventories.

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Sales of luxury vehicles are higher than usual. This increases the average sale price of all vehicles. Along with the MSRP, you can expect to pay interest, fees, and other expenses. In this article, we’ll discuss negotiating the sale price for a vehicle, potential fees, buying a car in another state, gas, insurance, and maintenance.

Negotiating the Sale Price for a Car, Truck, or SUV

Before you visit a dealership and buy a car, it’s a good idea to think about your budget and the amount of income you have left every month after paying your rent or mortgage, utility bills, credit card bills, and other expenses. Comparing prices between multiple dealerships can help you find the best deal. Learning more about the terms dealerships use and their costs can help you get a better price as well:

Sticker Price

The sticker price or MSRP is the manufacturer’s suggested retail price for a vehicle. It doesn’t include taxes, documentation fees, license fees, or dealership surcharges. The MSRP also doesn’t include any options or higher trim levels.

Invoice Price

The invoice price is the amount that a dealership pays the manufacturer for a vehicle. Starting your negotiations with the lower invoice price and then moving closer to the MSRP can often help you save more money than starting your negotiations with the MSRP. After you decide what make and model you want and which features and options you’ll prefer most, it’s a good idea to research the invoice price for the vehicle. That way, you’ll know where you need to start negotiations.

Potential Fees

When you buy a car, you may need to pay destination fees, sales taxes, title and tag fees, and other expenses. The prices of new cars often include VIN number etching, dealer preparation, an extended warranty, fabric protection, paint protection, and other additional fees.

VIN number etching is the fee for putting a vehicle identification number on a vehicle. You can find the VIN number for most cars on the driver’s side dashboard when you’re looking from outside the vehicle or on the bottom of the driver’s side door when you’re inside.

Since 1981, VIN numbers contain 17 letters and numbers. The first character is the location where the vehicle was built. Numbers 1, 4, and 5 were made in the United States. The second two characters abbreviate the manufacturer’s name. Then, the next five characters are for the brand, engine size, and type. After that, there’s a vehicle security code, a letter or number that symbolizes the model year, a letter for the plant where the vehicle came from, and a serial number for the vehicle.

Dealer preparation fees include any maintenance or repairs needed and fuel. Depending on this amount, it may be a good idea to ask for a breakdown of these fees as a bargaining tool.

An extended warranty can help you pay future repair costs for your vehicle. However, extended warranty companies are for-profit. This means that most people are likely to pay more for their warranty over the years than they would for repairs. You can buy an extended warranty with a new vehicle, or you can add it to a used car.

Telling the dealership you don’t want an extended warranty can help you save money on your next car. You can keep that cash in a savings account or an investment fund. It can help you pay for vehicle repairs and other emergency expenses. You can also avoid having to pay deductibles when you use the extended warranty.

Fabric and seat protection cover repairs for stains and other damage to a vehicle’s interior, and it often costs more than $100. Paint protection includes rustproofing, and it helps vehicle exteriors stay shiny without needing regular washes or waxes. It usually costs more than $200. However, it can wear off over time. To keep the paint looking like new, people often need to apply new paint protection a few times per year.

Title and tag fees, also called registration fees, cost less than $200 in most states. In some locations, they’re less than $30. To pay this fee and get a new license plate for your vehicle after you make a purchase, you’ll need to visit your local Department of Motor Vehicles (DMV) or Revenue Office. Vanity plates with lettering or other features that you choose are usually more expensive. Some states charge flat fees, and others charge based on vehicle weight, value, or age.

Buying a Car From Outside Your State

When you buy a car from outside your state, you may be able to get a better price than buying a vehicle near you. However, sales tax could also be higher.

Alaska, Oregon, Montana, New Hampshire, and Delaware have no sales tax. However, when you buy a car from outside your state, you may need to pay a destination fee to cover shipping from the dealer to your address. If sales tax is high in your state, the destination fee might be worth it. You could need to wait several weeks for your vehicle to arrive, and you won’t get a chance to test-drive it before you buy. Florida has the lowest initial fees for a new car. The cost of buying a car is highest in California.


Buying fuel for an efficient vehicle can cost over $1,000 less per year than choosing a big truck or SUV. Before you pick a vehicle, calculate how many miles you drive per month on average. Then, you can use that figure to predict how much gas will cost. Remember to use the current price in your state for the type of fuel recommended for the vehicle. Premium or diesel fuel is usually the most expensive, and regular gas is the least expensive. There’s also a medium-octane fuel that’s between regular and premium gas in quality.

You can choose an electric vehicle as well. Charging an electric car costs less than fueling a gasoline engine. There’s also a new tax break for electric vehicles. It’s worth up to $7,500, but it’s not refundable. This means that to get the full amount, you would need at least $7,500 in Federal tax debt for the year. People with less debt will get a credit for the amount that they owe. The remaining money doesn’t carry over to subsequent tax years.

Insurance Costs

The amount you pay for vehicle insurance depends on the state, the condition of your vehicle, and its price. Michigan has the highest insurance rates and Maine has the lowest. Idaho and Ohio are more affordable than other states as well.

Comprehensive insurance coverage costs more than the liability coverage required in most states. Along with damage to other vehicles, buildings, or other structures, it covers damage to your vehicle that you didn’t cause. Most comprehensive policies have a $500 deductible. People usually need to pay that amount before getting the repairs they need.


Maintenance costs for older vehicles can total several thousand dollars per year, and newer cars usually cost less than $1,000 to maintain. Maintenance costs can include oil changes, tune-ups, and new tires. You could also need to replace your car’s battery, lights, light bulbs, belts, or hoses. Synthetic oil doesn’t need changing as often as mineral oil, and it can help extend your engine’s life by providing better lubrication. Some synthetic oil can last for up to 15,000 miles. However, it’s more expensive than traditional engine oil, which lasts for around 3,000 miles.


Older vehicles, and cars with a lot of miles on the odometer, depreciate in value. As the manufacturer creates new versions of a car, truck, or SUV, the potential sale prices of the older versions usually drop, even when you don’t drive them often. To find out the price your vehicle would sell for, you can check Kelley Blue Book.

You can also look at local newspapers and social media sites to find out what prices vehicles similar to yours are selling for. You can usually get more money when a vehicle has a higher trim level and more options. Low mileage and a recent model year can help increase the value of a car as well.


People often overlook parking fees, but they’re part of owning a car for many people. Some individuals who live in the suburbs or rural areas don’t need to pay for parking because there’s plenty of space nearby. People who live in a city or commute there are more likely to need to pay for parking at least occasionally. If you’re willing to take a walk to get to your destination from an affordable parking spot, you could save hundreds of dollars per year.

Interest Rates and Fees

The interest rates for a car loan usually range from about 3 to 15 percent. Lower promotional rates are sometimes available as well. Many people with good credit can even get a 0 percent promotional rate for a limited time. The annual percentage rate (APR) is the interest rate plus origination and other fees. Checking offers from a variety of banks and credit unions can help you find the lowest available interest rate and APR for your credit rating.

If your credit isn’t good enough to get the rate you want, you can try to improve it. Building your credit history can help you increase your credit rating. Do your best to pay all your bills on time. That way, you can avoid late fees and negative incidents on your credit report. To prevent late bills, you can set up automatic payments with most companies. Then, the minimum amount due will come from one of your credit card accounts or your checking account.

Increasing your income can help you increase your credit rating as well. The FICO score (Fair Isaac and Company) ranges from 300 to 850. Some lenders also use the FICO auto score. It ranges from 250 to 900.

For the base FICO score, the average is about 700. Scores above 670 are good. Many lenders offer people with credit scores above 740 lower interest rates because their risk of repossession or default is very low. A fair credit score can be from 570 to 669, and a poor score ranges from 300 to 569. Even with a low credit score, people can still qualify for car loans. They could need to pay higher interest rates or higher fees. They might also need to make a bigger down payment.

Along with payment history and income, lenders look at the length of your credit history, the mix of credit accounts open in your name, your credit utilization or the percentage of your credit that you use, and the number of new accounts you open. Credit utilization should be less than 30 percent for most people, and a lower percentage is better. Too many new credit accounts could be a warning sign that a person is having financial problems.

Other types of credit scores are available as well. They come from three major credit bureaus: Experian, TransUnion, and Equifax. These three major agencies together released VantageScore in 2006. Versions 3.0 and 4.0 are popular for car loans. If your credit rating has increased since you applied for your auto loan or market interest rates for auto loans have decreased, you could get a lower interest rate and lower monthly payments by refinancing.

Refinancing your car loan can also help if you have temporary financial problems. You can get a loan with a longer term and lower payments. People can also sell their existing vehicles and buy less costly ones with lower mileage. Some lenders will let people take cash out of their auto loan to pay for emergency expenses, but you should avoid this if you don’t want to owe more for your vehicle than it’s worth.

Many credit card companies and banks and will give you your credit score for free. These inquiries are soft credit checks, so they won’t lower your credit score or count against your credit report. Along with checking your credit score, it’s a good idea to get copies of your credit reports from the three major credit bureaus. You can then dispute any negative information on your report that’s not correct.

Your credit scores can change whenever a lender reports information to the credit bureaus. Your score might change when you make a payment, have a late payment, or apply for a loan.

Car and Driver provides useful research about credit scores, car loans, and other insights when buying your next vehicle. We can help you find an SUV, car, or truck you’ll love. We can also help you get a great deal on an auto loan.

Headshot of Elizabeth Rivelli

Finance & Insurance Editor

Elizabeth Rivelli is a freelance writer with more than three years of experience covering personal finance and insurance. She has extensive knowledge of various insurance lines, including car insurance and property insurance. Her byline has appeared in dozens of online finance publications, like The Balance, Investopedia,, Forbes, and Bankrate.

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