How to Budget for a New Car from the Car Dealer

A Trip to the Car Dealer

To most people, new cars smell terrific. Used cars often have a smell all their own, but not too many people find it to be pleasant.

How much would you pay for that new car smell? I’ve paid more than I should more than once. I owned no less than three new vehicles within seven model years. I even bought one of those after I got married.

My wife helped change my perspective on vehicles, though. And I’ll share some of the pros and cons of used vehicles with you to hopefully help you make decisions that will keep you on track to achieve financial freedom and retire early.

Reasons to Buy a New Car

For me, new cars were not about status. I bought three new vehicles between 2008 and 2014, but the most I paid for any of them was the $16,300 we paid for a 2014 Honda Civic.

My reason for buying new cars was dependability. Each of the vehicles I bought came with a pretty substantial warranty. With that peace of mind, I could accurately predict what the total cost of ownership of my vehicle would be while it was under warranty.

The folks in the finance office also talked me into an extended “service plan” on two of the vehicles. In theory, this extended a large part of my coverage all the way to 100,000 miles. But we’ll talk about the folly of those decisions later.

How to Buy a New Vehicle from the Car Dealer

If you must get a new car, I would probably recommend you do what I did. First, I bought the most basic model in one of the most common colors. Bells and whistles on vehicles can be convenient, but they’re not necessary. And they are expensive on new cars. And you’re the one paying the full undepreciated price on the new vehicle.

Second, I bought the outgoing model year’s vehicle all three times. For example, in 2014, the 2015 Civics were out. There were still 2014 Civics available at substantially lower prices, though. You may lose a little resale value that way, but that can be lessened by holding onto the vehicle a long time.

Finally, do as much research as you can on the vehicles you might be interested in, and think about all of the costs. Sites like are great for establishing a baseline.

This is also applicable for buying used cars, and it is what eventually moved me to buying used cars for good.

Budget for All the Costs of the Car

Each vehicle has a sale price. In most states, there is also an initial sales tax, which is based on the sales price. The more expensive the vehicle, the more expensive the sales tax. In my state, as in many states, there is also an annual personal property tax assessed on your vehicle. Again, the more expensive the vehicle and the newer the vehicle, generally speaking, the more expensive the personal property tax.

You are required by law to carry insurance for your vehicle. There are exceptions, but generally speaking, the more expensive the vehicle, the more expensive the insurance.

You also have costs associated with each mile you drive. The most obvious of these costs is fuel. Of course, more fuel efficient vehicles end up costing less per mile to operate than less fuel efficient vehicles.

Consider Buying Fuel Efficient Vehicles

If you have several children or a job that requires lots of equipment, a compact car that maximizes fuel efficiency might not work for you. But all other costs being equal, it makes sense to buy the most fuel efficient vehicle you can. If fuel prices go up, you’ll only save more money, or at least spend less.

Remember Maintenance and Repair Costs

One more cost worth considering is the cost of maintenance and repairs for the vehicle after purchasing from the car dealer. This cost was my main reason for buying new cars before I got married. I wanted my costs in this area to be fixed.

All these costs might make you want to consider side hustle ideas, because new buying new cars from dealerships is not cheap!