Once you have determined what you can spend each month to own that new car and you’ve determined your credit rating, you can begin figuring out which vehicles fit your budget. At AutoLoanDaily you can search by make and model or price. This will bring up photos, specifications, options and other details of all models available in the United States.
We won’t spend much time here on how to research the quality of vehicles. There are a many Web sites that can help you with that. Consider subscribing to Consumer Reports for a year. For $26 you get access to their independent consumer testing and research information complete with ratings on reliability. Consumer Reports accepts no advertising, uses its own staff to test cars and write reviews and surveys thousands of members annually about the reliability of specific cars.
What we do want to address here is how important it is to make sure you understand the difference between the price dealers advertise and what you will end up paying to buy the car. The difference can easily reach $2,000 and bust your budget.
One reason depreciation is so steep in the first year of owning a new car is because of one-time costs that jack up the purchase price and can never be recovered. These include dealer destination fee ($300 to $600), state sales tax (up to 9.35%) and DMV fees like title (up to 1.5% of purchase price). These are the costs that dealers usually footnote in their newspaper ads by saying “Price does not include taxes, tag and title…”
It’s critical that you anticipate these costs and then ask yourself whether you can still afford the car. If not, you need to lower your expectations a notch or two.
This is why we began this series of articles with the essay on budgeting. If you want to avoid getting in over you’re your head, it’s critical you have the discipline to live within your budget.
Here are the steps for calculating total price out the door:
For instance, let’s say I’m buying a 2008 Nissan Pathfinder LE, 2WD in Charlotte, N.C. Here is how I would calculate the total purchase price before incentives.
- Advertised price: $31,309
- Options: none
- Destination fees: $300
- Local sales tax: 7.25 % or $2,270.
- DMV fees: $75
- Total: $33,953