When you get that new car itch, it’s easy to get caught up in imagining what you’ll do when you hit the road. But, it’s important to figure out what your next set of wheels will really cost you, so you can pick the right one for you. Here are some things that affect your final price.

  • The purchase price. Remember—the basic dealer price is just the beginning. Items like special options and extended warranties can significantly increase your costs. It’s also likely that different dealers will offer the same car at different prices. That’s why it’s important to do your homework and shop around. Three popular guides many people use as a starting point are the Kelley Blue Book, NADAguides and Consumer Reports.
  • Sales tax and registration fees. Sales tax varies by state, but it’s generally a percentage of the vehicle’s sale price. For example, a 5 percent sales tax on a $20,000 car would add $1,000 to your purchase price. Registration costs also vary by state and must be renewed periodically—how often depends on the state in which you live.
  • Other taxes. Some states require car owners to pay personal property taxes on their vehicles each year. It’s a good idea to check whether your state has this requirement. For Active Duty military members, some areas may exempt you from taxes if you aren’t in your legal state of residence. Check with the state or local taxation authority to see if an exemption is available.
  • Vehicle inspections. If you’re buying a used vehicle, you should have it inspected by a mechanic you trust to assess its condition before you buy it. In addition, many states require a periodic state vehicle inspection (cost and how often varies by state). You may also need to perform additional emissions or other testing as required by law, depending on where you live.
  • Financing and loan rates. If you finance your vehicle, a major factor in its true cost is the APR (annual percentage rate) on your loan. It’s the annual percentage rate you’ll pay on the money you borrow. The lower the APR, the less you’ll pay in interest, and the less you’ll pay over the life of the loan.

Not everyone qualifies for the same APR. It will depend on your loan term (how long you have to repay your loan) and your credit history. For example, a person with a high credit rating might qualify for a 4.98 percent rate on their loan, while someone with just a fair credit rating might qualify for 11.69 percent.*

Even a small difference in APR can add up. You can use Navy Federal’s auto loan calculator to estimate your own costs based on the interest rate, amount borrowed and loan term.

Here’s an example of how different APRs can affect a $15,000 auto loan with a term of 60 months:


4.98% APR

11.69% APR

Loan amount



Monthly payment



Total paid over life of loan



Total interest paid over life of loan




One thing to keep in mind: although monthly payments are generally higher if you choose a shorter term, you’ll pay less in interest overall.

  • Maintenance costs. A new vehicle usually has fewer mechanical issues than a used one and may be covered by a warranty for a certain period. But, even new vehicles will need servicing that isn’t covered by a warranty, such as routine oil changes and tire rotation. For used vehicles, you may need to take more frequent repairs into consideration.
  • Insurance rates. How much you pay for insurance is based on the make, model and year of the vehicle as well as your credit rating, personal driving history and where you live. It’s a good idea to check with your insurance agent before you start shopping.
  • Fuel. A vehicle’s fuel economy and how much (and how fast) you drive will factor into your annual costs. Of course, hybrid and electric vehicles will use less (or no) gas, but their sale price could be higher than gasoline-based ones.
  • Depreciation. Although depreciation won’t factor into your vehicle’s sale price, it can affect your finances if you like to trade in for the newest model every few years or if it’s ever in an accident. Cars lose about 10 percent of their value as soon as you drive away from the dealership, and about 20 percent by the end of the first year, which will affect its trade-in value.** And, if your car is ever totaled in an accident, you could find there’s a gap between what your insurance company is willing to pay and the amount you still owe on your loan.

(Tip: When financing a new or used vehicle, consider guaranteed asset protection (GAP) insurance. It may cover the gap between what you owe and what you receive in insurance for an accident.)

We’ll Help Steer You in the Right Direction

If you’d like to know more about the car-buying process, applying for a loan or how auto loan preapprovals work, visit the Navy Federal Auto Learning Center.

* Source: U.S. News and World Report, usnews.com. As of February 2020.

** Source: creditkarma.com.