Avoid These 5 Hidden Costs When Buying A New Car

Tax Credits

Hybrid models and electric vehicles cost more upfront, but they can save you money in the long run. Besides saving you money on gas, they're often eligible for tax credits on the local, state, and national level. These eventually bring the price of an electric-based car closer to that of gas-powered, so ultimately it depends on what kind of car that you want to drive.

Tax Rates

Usually, you must buy a car within the state in your residency is located. However, if your state doesn't require this, you might have the chance to save money on your purchase by crossing state lines. Research the tax differences, and find out whether you can benefit from a lower purchase price. At the same time, there might be hidden tax pitfalls, so look out for those too. This takes some research; but if you're in the right place, it can help save money.

Fees

Fees can vary greatly, and it's hard to predict what kind of fees or other hidden costs that you may face. Luckily, new cars generally come with fewer fees than used cars. Some of these fees may baffle you. For example, many dealerships have a "floor plan" fee, which exists to pay the dealer for keeping the car in its inventory.

Remember that you could likely have to pay for registration, title, licensing, documentation, compliance, emissions testing, advertising, and many more fees that seem as if they come out of nowhere.

Many of these fees are honestly nickel-and-diming, but some of them can hit pretty hard. For example, some dealerships might charge you a shipping fee. That's the cost to ship the car from the manufacturer to the dealer. It can make you think: Why didn't they just put that on the car price? This fee alone can sometimes reach $1,000.

Do everything that you can to learn about all the fees before you sign anything. Talk to the dealership about the fees. Don't be afraid to let them know what you're unhappy about. Some of the fees can't be removed. However, if you let them know that you're seriously reconsidering the purchase due to the fees, they might find that they can remove some of them.

Financing Charges

Most people finance their vehicles to purchase them. This means that you set up your payment for the car via monthly payments, usually over a few years, until the car gets paid off. The monthly payment changes based on how many months over which the payment spreads out. Luckily, new cars usually have a lower financing or interest rate. Also, check out some cheaper cars, such as the affordable new cars from KBB.com if you want to look for a lower financing rate.

Make the biggest cash-down payment that you can when purchasing the vehicle because this will reduce the monthly payments and therefore reduce the interest charges. When determining dealerships based on model prices, pay attention to the type of financing with the model to make sure that it's the same so you can compare dealerships accurately.

Add-Ons

When you meet with the finance manager, remember that you're going to have to remain firm to avoid paying extra costs. Finance managers often try to get you to include all kinds of add-ons to your contract, such as credit insurance, anti-theft devices, and extended warranties. Anti-theft devices might not be worth the extra cash, considering that you must get insurance coverage on your vehicle anyways -- another expensive part of the purchase.

Mainly, just make yourself aware of all the extra costs that can arise when purchasing a vehicle. Let the dealers know that you're serious by questioning them about these extra fees. While they may not answer you with full honesty, they'll at least know that you mean business.

JT Ripton is a freelance business, tech and lifestyle writer out of Tampa, FL. When he's not writing, he's consulting with start up businesses around the area helping them succeed, and checking out the newest things in tech.