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With so many makes and models of vehicles out there, it can be hard to choose the right one. But before you worry too much about that, one of the first things you should do before heading to the dealership is set a car-buying budget. This budget should cover more than just the initial purchase price of the vehicle. It should also, ideally, take into consideration any additional costs that come with buying the car–such as maintenance, repairs, and gasoline.
When buying a car, some people don’t account for all of the extra costs that come with their purchase. This is especially common for those who look at new, luxury or high-end vehicles as these types of cars tend to have additional — or simply higher — costs that people don’t often consider.
If you’re thinking about purchasing any vehicle, whether it’s high-end or otherwise, there are specific costs to be aware of. GOBankingRates spoke with financial experts Justin Albertynas, CEO of Ratepunk, Jeff Rose, CFP and founder of GoodFinancialCents.com, and Chris Powers, CFP, AIF, AEP, and managing partner at Global Wealth Advisors to see what people spend too much money on when buying a car.
Here’s what they said.
Depreciation
When shopping for a car, many people will still purchase one with a sticker price that’s on the upper end of their budget. One reason for this is that a higher-end vehicle can be viewed as a status symbol. But regardless of the reason, the cost to be aware of is depreciation.
“I think that a lot of times, people base their decision on buying a vehicle on emotion, like ego,” said Albertynas. “For many, it’s a status symbol, but what it is in reality is a rapidly depreciating asset, actually one of the most rapidly depreciating assets one could buy. The value of a car usually depreciates around 20% in the first year of ownership.”
The average cost of a new luxury vehicle is around $75,000 — tens of thousands of dollars higher than a standard car. If it depreciates 20% in the first year, that’s a $15,000 loss of value.
Car Insurance
Generally, the cost of insuring a luxury vehicle is higher than the cost of insuring a lower-priced vehicle. This is largely due to the fact that luxury cars are more expensive and require specialized parts that are costly to repair.
“When buyers are at the lot and excited about the car they selected, they often forget one important aspect of car ownership,” said Powers. “The cost of insuring that car can add a substantial expense to their budget. Even if a buyer gets a great deal on a luxury vehicle, it’s important to remember that luxury vehicles come with luxury maintenance.”
“Premiums can vary significantly based on the car’s value, model, and safety ratings,” added Albertynas. “This is most often the biggest expense beyond the sticker price.”
Fuel
The average cost of regular gas in the United States is around $3.75 a gallon right now.
“Beyond the sticker price, owners should be mindful of various additional costs,” said Rose. “For instance, fuel can cost around $2,390 annually.”
In some cases, luxury vehicles and sports cars require premium gas, however. Currently, the cost of premium gas is $4.56 a gallon. If your new vehicle requires premium fuel, you could be spending much more money annually than you would with a different vehicle.
Registration, Taxes, and Fees
Part of your car-buying budget should include registration, taxes, inspection, and other yearly fees. These fees alone cost around $762 on average, according to Rose.
Some states have an additional surcharge on vehicles that cost more than a certain amount, something that may apply to luxury vehicles. This additional charge does not include any additional state fees or sales tax.
“These costs can significantly add to the monthly payment, and being aware of them is crucial to understanding the true cost of vehicle ownership,” said Rose.
Maintenance Costs
If you’ve ever owned a car before, you’re probably already very familiar with the cost of maintenance. It’s generally recommended to get regular maintenance done every 5,000 to 6,000 miles or 6 months, whichever comes first. Most major maintenance should be done about once a year.
“Oil changes, tire replacements, and unexpected repairs will add up and are mandatory,” said Albertynas. “It’s best to put aside at least $1,000 for a year of repairs.”
But this is for standard vehicles. If you have a high-end car, you might end up spending thousands of dollars on maintenance and repairs. This is especially the case for makes that require custom…
Read More: I’m a Financial Expert: 8 Extra Costs To Be Aware Of When Buying a High-End Car