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Shop Smarter: Understanding the Hidden Costs of Car Buying

Very few things beat the thrill of owning a new vehicle. If you’ve been saving up for a new or pre-owned automobile, the auto shopping experience might be in your future.

Picture this: you’ve done the research. You’ve seen the ads, visited the manufacturers’ websites, and set your sights on your ideal vehicle. On top of that, you’ve seen the price of the car you want, confirmed your savings, and are about ready to call the dealership.

Before you hit the negotiating table, however, remember that the cost of a car doesn’t end at the sticker price. A range of fees and expenses may drive the final price well above your comfort zone.

To avoid a bad case of sticker shock at the negotiating table, we recommend being prepared for the hidden costs of buying a car. Here are a few things to look out for while shopping and applying for financing.

Understanding the Manufacturer’s Suggested Retail Price

One of the most significant portions of a car’s final price is its MSRP, the manufacturer's suggested retail price. It’s the price the manufacturer recommends a customer pay for their vehicle.

If you look closely at car manufacturer sites, you’ll see that the MSRP is the starting price for a given model. Indeed, you might see a caption by your dream car saying something like, “Prices starting at,” and then it shows a number that seems within your budget.

Here’s the catch: the first price you see is the suggested price for the base configuration of that particular model. Nowadays, manufacturers will release different versions of the same model, known as “trims,” as a way to upsell to consumers.

The way a manufacturer decides what goes in a trim varies, but you should be prepared to pay above the MSRP if you’re looking for features like:

  • Larger or enhanced infotainment centers
  • All-wheel or four-wheel drives
  • Engine with a higher horsepower/acceleration
  • Heated seats or additional cabin amenities
  • Additional or enhanced cargo space
  • “Special edition” paint schemes or cosmetics

Manufacturers have preset trims that have certain upgrades but not others. This can cause the MSRP to fluctuate.

This doesn’t even cover what a dealership might charge. Let’s talk about that now. 

How Dealerships Influence the Final Price of a Vehicle

Dealerships, whether a brick-and-mortar location or entirely online, also add fees that increase the final price of a car.

The fees a dealership might impose on you go beyond the MSRP. Since you are dealing with a business, you will also be expected to pay fees to keep that business running (and profitable). These additional costs might include:

  • Invoice Price: What the manufacturer charges the dealership to purchase the vehicle.
  • Destination Charge: The shipping costs a dealership pays to deliver the vehicle to their lot.

There is also the “dealer fee,” which is a catch-all term that can cover a variety of add-ons or services the dealership includes when purchasing a vehicle. The dealer fee can consist of many things, like:

  • Pre-cleaning or reconditioning services
  • Administrative costs
  • Documentation processing costs

Additional Costs To Consider

So, we’ve already seen how car makers and sellers affect the final price of a vehicle. There’s another player involved when determining the cost of your dream car, and that’s the government.

The first cost is the sales tax, a percentage of the sale price added to the final total. The sales tax is similar to buying groceries or other consumer goods in the state. Since purchasing a vehicle can cost tens of thousands of dollars, you can imagine how sales tax can impact the final price.

Registration and title fees, often shortened to “tag and title,” are also charged. These fees are associated with establishing car ownership and issuing a new license plate.

These fees are not negotiable with the dealership. To get an idea of how registration and title fees might affect the final price of a car in Florida, refer to the fee schedule posted by the Department of Highway Safety and Motor Vehicles.

Know Where You Can Cut or Manage Costs

It’s natural to want the best deal possible when buying an automobile. Here are a few ways to manage your costs as you go car shopping.

First, set your expectations. Review what you need out of your car and what you can live without. For instance, if your vehicle is mostly going to be used to commute to the office, you can probably cut costs by opting for a trim without all-wheel drive.

Next, shop at a dealership that doesn’t have dealer fees or at least charges less than the competition. You might have to look at a dealership’s fine print to determine how much they charge.

Finally, consider getting pre-approved for an auto loan. Getting a loan from your financial institution can lower your interest rate compared to getting financing from the dealership. Also, getting pre-approved for a car loan can help with budgeting since you already know how much vehicle you can afford.

When it’s time to start your car-buying journey, take First Florida along. Explore our website to learn about our auto loans, or visit your local branch to discuss your options.


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