Sticker Shock Is Only The Beginning

By Eric Peters, Automotive Columnist

Buying a new car can put you one step closer to living in a van down by the river.

New cars cost about $25,000 on average for the typical family sedan — which is about 30 percent more, adjusted for inflation, than a family sedan cost in the 1970s.

But it’s not just the up-front price that gets you. In addition to making the monthly payment for the car itself, there are at least three other things you’ll probably be paying for, too. People sometimes forget to factor them into their buying decision — which can put them once step closer to that van by the river… .

1) Taxes

There are sales and personal property taxes on motor vehicles in many states. The higher the vehicle’s retail value, the higher the tax.

For instance, a 2 percent tax on the sale of a $22,000 car is $440. On a $28,000 car it is $560.

But at least the sales tax is a one-time hit.

In many states, there are also annual personal property taxes on vehicles. You pay every year, for as long as you own the vehicle. This can amount to a lot of money.

For example, I own a 13-year-old Nissan pick-up that’s maybe worth $4,000 or so. This year, the state of Virginia demanded another $100 from me. Over the past 6-7 years, I’ve paid close to $1,000 in property taxes on this truck — which I bought used for less than $8,000. In other words, I’ve paid taxes that amount to almost 13 percent of the purchase price — just for the privilege of owning this old truck.

The personal property tax on a new vehicle with a retail value of $30,000 might be that much each year — for years to come.

Over the course of a seven or eight years, a person could end up paying an additional several thousand dollars in personal property taxes — amounting to an extra 10-20 percent in fixed purchase costs above and beyond what you actually paid for the car itself.

Don’t forget to keep this in mind if you live in a state that has a personal property tax on motor vehicles.

2) Insurance

This is another big cost that many people forget to take into consideration before they go new car shopping. The cost to insure a new vehicle, even if you have a perfect driving record and are in a low-risk group (over 35 and married) the annual premium for a comprehensive policy on a new or near-new vehicle in urban/suburban areas is often more than $1,000 annually. If you’re in a high-risk group (under 30 and single) or have a few tickets to your credit, it might be twice that or more.

Insurance costs are higher than they have ever been for two reasons, chiefly.

One, modern cars are much more expensive to repair — especially after minor fender-bender accidents — than the cars of the past were. For example, a new car’s multi-faceted headlight “assembly” can cost several hundred bucks vs. $25 or so for an old-style sealed beam headlamp. Rubber/plastic bumper covers are easily torn and hard to fix; usually, they’re just replaced — at huge cost to you. If the airbags go off, the steering wheel and dashboard have to be replaced. That alone can cost $2,000 before even getting into any bodywork.

Two, we’re forced to buy insurance. We can’t just say, “No thanks — you charge too much. I’ll take my chances and just pay for whatever happens if something does happen out of my own pocket.” Since we can’t say no, we have to say yes — which means the insurance cartels can all charge everyone a high price since they’ve got us all cornered. If we want to drive (legally) we have to pay.

Bottom line, insurance costs can be a killer, especially if you’re driving an expensive or “high risk” vehicle, such as a high-performance sports car. What will you do if your premium doubles after you get a big speeding ticket? Can you afford it?

3) Maintenance and Upkeep

Here’s a third factor that is becoming one of the major unexpected costs of owning a new (or late-model) vehicle. The complexity of modern cars has increased exponentially in recent years as even mass-market models now typically come equipped with power everything, as well as elaborate electronic equipment such as climate control air conditioning and GPS. Even basic service is getting beyond the capabilities of the weekend do-it-yourselfer. For other than basic stuff like oil and filter changes, most of us will end up facing paying a dealership service technician $70 per hour.

It’s true that cars were more maintenance-intensive in the past (annual tune-ups, for instance) but the cost was relatively low and a DIY type could often handle the job himself. Today, “routine maintenance” sometimes means $800 to change a timing belt at 60,000 miles and a major “tuneup” can cost $400 or more. Seventeen and 18-inch wheels are common — and each tire often costs $200 or more vs. maybe $75 back in the days when most cars came with 15 inch steel wheels and whitewall radials.

This is why it’s savvy to shop makes/models with very generous warranties — and be prepared ditch the thing within a year or two after the warranty ends, unless you have a large slush fund to deal with the possibility of an expensive major repair.

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