Should you ever buy a new car?

With new wheels come new expenses
With new wheels come new expenses © Stuart Miles/

It's not just about the car note.

The size of the monthly payment might be the first thing people consider when eyeing a new car. But easily overlooked is a whole other set of expenses that are rarely considered with buying a car, such as auto insurance, gasoline bills and taxes.

"For many people, depending on where they live, a newer car is going to mean higher insurance," says Mary Ellen Nicol, a certified housing counselor for CredAbility, a nonprofit credit counseling agency based in Atlanta.

Car insurance is based in part on the value of the vehicle. Newer cars tend to cost more to insure because they have newer parts and, as a result, would cost more to repair after an accident.

Gas prices are another consideration, Nicol says, especially if you're looking at a new car that calls for premium gasoline instead of regular or gets lower gas mileage than your current car.

Then there are the taxes and fees associated with buying a car, says Philip Reed, senior consumer advice editor with, an auto research website based in Santa Monica, Calif. "What a lot of people don't realize is that the fees to make that transaction are going to be pretty steep," he says.

In California, the purchasing process alone can set you back more than $1,200 on a $10,000 car, Reed says. California's sales tax on a $10,000 car is 9.25 percent, which comes out to $925. Registration fees for that car would cost about $150, and documentation fees would be $100 or less.

And some states charge either an annual or one-time ad valorem tax on automobiles that's proportional to the value of the car.

"You can see your ad valorem double or triple when you buy that new car," Nicol says.


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