What are the hidden costs of buying a new car?

When it comes time to buy a new car, you probably spend a great deal of time scouring the market for the best possible deal you can find. You're searching local merchants, auctions, perhaps even going online to see if there are discounts or deals you're not aware of. All the while, you're looking to find the lowest possible price.

If you don't plan effectively for these extra dollars, you may be spending a bit more than you initially planned. It helps, therefore, to understand some of the fees out there and know how they factor in.

What are the hidden costs?

A large part of the car shopping process involves hunting for the lowest possible sticker price, but there may be more costs to consider that you won't see on the sticker. Some of the hidden expenses include:

• Registration fees: Before you purchase a new car, it's registered as someone else's property - usually the dealer offering it up for sale. There are fees you have to pay before transferring the ownership to yourself¹.
• Stamp duties: State governments in Australia have the right to levy taxes on the purchase price of any vehicle you purchase. You may find that costs associated with stamp duty will depend on the purchase value of your car².
• Insurance premiums: In New South Wales, you're required to purchase Compulsory Third Party Insurance (CTP) which protects yourself from costs arising from injury or death to other people in an accident³. Additionally, you should strongly consider purchasing other optional insurance products to cover you for damage to your vehicle or another third party’s vehicle⁴.

You might think you've found a great deal on a car, but have you considered all of the potential costs?

How should you adjust?

It's possible that, after you've added up the whole cost of obtaining and keeping various vehicles, you may find it necessary to change your buying strategy. As you comparison-shop the car market, looking for the best deals, consider comparing the other costs as well. You may decide that it makes more sense to use the "drive away" price of a car rather than the manufacturer's list price⁴.

Figuring this out may require some research. After all, there can be many variables to consider. How do the rules and regulations change based on the state you're shopping in? What about insurance - what factors influence your premiums?

Consider all the options as you go about making your purchasing decision. Consider various types of cars, dealerships and regions around Australia. You never know where your mind finds an option that ultimately works out best for your finances.

Source:

1 - NSW Roads and Maritime
2 - NSW Government Office of State Revenue
3 - ASIC's MoneySmart
4 - The NRMA Blog