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Cost Breakdown: Car Buying 101

Purchasing a new car is a huge investment. Understanding exactly what you are paying for and knowing what amount of a payment to expect is the first step in making an assertive decision. In most cases, owning a car is a necessity that takes a few years to save up for. Knowing what expenses to expect can let you know what you can afford and save you a good deal of money.

Here are a few factors that make up the price on your new car purchase and some expenses to figure in once you drive your car off the lot:

Dealer Costs

With any purchase you make, the cost will (in one way or another) factor in keeping the lights on at the place of business. Buying a car is no different. The cost of stocking the dealership with vehicles, delivery cost, interest costs on loans used to purchase the vehicles, cleaning and preparing the vehicles for display, building rent, utilities, and staff salaries are all figured into the price margin of each car. These costs are necessary in fulfilling the consumers needs and provides a safe environment to make a purchase.

Buyers’ Costs

If you have ever been to a dealership, you have seen the huge stickers in the window of every car. This is called the sticker price, also know as MSRP (Manufacturer’s Suggested Retail Price). This price includes the base price (cost of the car, standard equipment (airbags, floor mats, etc.) and the factory warranty), installed options and the manufacturer’s transportation costs. The sticker price can be misleading to first time car buyers, confusing them into thinking this is the final cost of the car. This price is just to lure you into additional costs.

Keep in mind if you are trading in your old vehicle for a new one, the dealer may offer you a lower price for your used car and charge you an additional cost on your new car to make the transaction car profitable. This is a cost you should dispute, since they have already offered you a price to reduce the cost of your new purchase. Also make sure you are driving off the lot with a full tank of gas before signing off on the new car purchase. If your tank is not full notify the dealer to adjust the price to compensate for not having a full tank of gas.

Here Comes The Additional Costs

Once you have settled on a price for the vehicle, additional costs are presented that will increase the overall price of the car. License plates, vehicle registration and sales tax are required fees you must pay in order to drive the car off the lot. You will also be required to pay the dealership for prepping the car and having it ready for you to take home. A fee for completing and processing all the paperwork associated with your purchase is a “doc fee”. This amount varies by dealer and is also attached to the price of your new vehicle.

The finance manager (person who closes the sale) will most likely recommend purchasing an extended warranty to cover wear on the vehicle after the manufacturer warranty expires. Be aware of other warranties and coverage policies the dealership may try to attach to the price of your new vehicle.

Get Pre-approved

Before stepping on a car lot get pre-approved with Your NC Community Credit Union.

Getting pre-approved lets you know what you qualify for before you shop for a new vehicle. It gives you bargaining power during the sale. A word of advice: do not disclose what the credit union has offered you until the dealership tells you their financing terms; it could help you negotiate a better deal.

After you have closed on your new vehicle be prepared for the expenses that come next. Think about what your auto insurance coverage will cost, along with annual state inspections, routine maintenance and how much gas will run you. Keeping these things in mind will save you money and help you understand what you can afford. Hopefully these tip will help you prepare for your next trip to the car lot.

For more information on car buying, visit

To speak to someone about getting pre-approved call (919) 735-8224.

To complete our online application for pre-approval, visit