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Life Stages & Events

Buying Your First Car: What You Need to Know

Buying your first car is considerably more expensive than the sticker price reveals. Prepare yourself for the unavoidable expenditures that come along for the ride.

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Buying your first car? Congratulations! Before you plan your first road trip, though, there are several important financial factors to consider as you prepare to purchase this big ticket item.

Not just the sticker price

Buyer, beware. The sticker price posted on the window at any auto dealership, or even the listed price of a private sale, is actually considerably less than what you will need to pay to get your car on the road. Taxes and fees can vary depending on what state you live in, but there are some common threads that add up to unavoidable expenditures.

You should be prepared to pay sales tax on the vehicle before you ever pull out of the dealership's parking lot. Your sales consultant will calculate this tax based on the current rate in your state and will include it in your bottom line. The dealership will then submit the tax payment to the state government directly.

Taxes, taxes, taxes

Many states also assess an excise or personal property tax based on the book value of your vehicle. This tax is assessed and collected annually and is generally not included as part of the fee package charged by your dealership. Be prepared to receive this bill in the mail at a later date.

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Registration, license plate and inspection fees

Speaking of your state government, it will also want to make sure your car has been safety inspected and is registered and easily identifiable, all at additional cost to you. Many dealerships, especially new car dealerships, will manage the trip to the Registry (or Department) of Motor Vehicles for you. You'll see your registration and license plate fees appear in the breakdown of charges on your invoice. Find out in advance if your dealership handles this end of the deal. Most states allow you a certain number of days within which the vehicle must be registered before penalties apply, so you'll need to plan ahead if you'll be completing this task yourself.

Even if your new ride has just rolled off the assembly line, you may be required to have the vehicle inspected by a licensed garage. They'll inspect all the lights and other safety features, plus run an emissions test before stickering your car. Your inspection sticker is good for a year and also must be completed within a set period of time after purchase. For specifics in your state, check with your dealership.

The basics

If you are buying your first car because you're just getting a driver's license for the first time, this is an expense to consider, as well. Your written and road tests will carry a charge separate from paying for the driver's license itself.

As you finalize your budgeting, factor in the cost of general maintenance and scheduled servicing, such as oil changes and tire rotations. And of course, gas is pricey these days! Be certain you've selected a car that not only meets your budget, but also is efficient enough to meet your needs.

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This information is for educational purposes only and does not constitute legal or financial advice. You should always seek the advice of a legal or financial professional before making legal or financial decisions.
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