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Auto Buying | Building Savings

What Are the Costs That Come with an Auto Loan?

October 12th, 2022 | 13 min. read

What Are the Costs That Come with an Auto Loan?

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In your search for cars and considering auto loans, you may be asking, “What are all the costs included in buying a car? How much should I have saved up before financing?  What goes into my monthly car payment?

double-bubble-car-and-repairThese are all great (and financially responsible) questions to ask – and you don’t even have to walk into a dealership or financial institution to get your answers. I’m more than happy to share the information with you here! 

YEARS AGO, when I financed Pepper - my beautiful stone-grey Chevrolet Malibu at the dealer - I had those same questions. Unfortunately, I didn't get the full scope of exactly how much I’ll need in car expenses, including maintenance, auto loan repayment amount, and fees at first, so I ran into a lot of unexpected costs.

costs to plan for when buying a car:


These are the frequent expenses you must be prepared to pay when having a car. This list might seem like a lot to handle but knowing what you'll have to spend and how to avoid certain fees will make paying for a car more doable. Don't worry - I got you.

I'll uncover the costs that come with your auto loan, so you'll have an idea of how much you'll need to save.  You can also use the loan payment calculator below so you're better prepared to pay off your auto loan and maintain your vehicle.


Paying-Money-Iconcosts to plan for upfront

Sales tax

Like with anything you purchase, you’ll be taxed on the cost of the vehicle. According to the North Carolina DOT,  "they collect a 3% “highway-use tax on vehicles instead of a state sales tax…. Which is assessed each time a title is transferred.” For a $30,000 car, that’s roughly $900.

According to the NCDOT, “you have the option to defer tax payment by getting a limited registration plate, which expires 60 days from the date of issue. You must pay the property tax by the time the sticker on the plate expires.” 

Title and registration fees

Many dealerships handle the process of registering your vehicle, assigning the title, and getting you your license plate so you don’t have to worry. Title and registration fees vary in different states, but in North Carolina, it costs $38.75 for a passenger vehicle. Here’s a look at all vehicle registration costs in the state of North Carolina.

Dealership fees

If you decide to finance a vehicle at a dealership instead of with a direct lender there are some required fees you’ll pay and there are some fees that are negotiable. The average cost of dealership fees is roughly $466 and includes:

  • Destination fee: The cost of the manufacturer that brings the car to the dealership that you buy. 
  • Documentation fee or processing fee: The convenience fee of the dealer doing the paperwork for you.  
  • Advertising fees: (This may be negotiable.) Dealerships try to charge a separate advertising fee because you may have seen their commercial. Talk to the dealer about removing this fee altogether. If not, then convince the dealer to add this fee to the price of the car instead of paying an extra fee upfront.
  • Preparation fee: Yep, they charge to have the car cleaned and ready for you to drive off the lot. You could argue that if the car is new, you wouldn’t need to pay this fee. 
  • Extended warranty and dealer maintenance plans: If anything went wrong with the car, dealers offer extended warranty and maintenance plans to make sure you’re covered when you need it down the line. Maintenance plans include oil changes, tire rotation, replacement filters- and regularly scheduled maintenance for your car needs. When purchasing your vehicle, these plans may be negotiable. 

Paying-Money-Iconcosts to plan for monthly

Monthly Car Payment

Your monthly car payment is made up of your principal payment + interest payment + add-ons (like GAP insurance or extended warranty)

  • Principal Payment: This is the amount of money that goes towards the actual repayment of the initial loan amount. 
  • Interest payment: Interest on an auto loan is essentially the extra fee you pay for using the lender's money to buy a car. The annual percentage rate (APR) represents the actual yearly cost of the loan expressed as a percentage. Many lenders offer fixed rates on an auto loan so the rate won't change for the life of the loan, BUT the interest amount will accrue and you'll eventually have to pay it all back to the lender. Luckily, the interest amount on your loan is spread out over the life of your loan, so you're not required to pay the fee back all at once. Learn more about How to Calculate an Auto Loan Interest Rate here.
Want to avoid paying more interest?
  1. Pay larger amounts towards your monthly principal payments.
  2. Repay your loan in full before its scheduled due date (Psst review your auto loan agreement and check with your lender about repaying your auto loan early. Some lenders charge prepayment penalty fees.)
  3. Make a sizeable down payment. Many lenders don't require you to make a down payment but it'll certainly help minimize the total loan amount. Here's an article that helps when considering a down payment on an auto loan. 
  4. Consider picking a shorter loan term. When you choose a shorter loan term you'll end up paying more in monthly payments but less in interest since interest accrues daily.   
fees and penalty charges
  • Late fee: If you’re ever late making a payment on an auto loan the lender gives you a certain grace period to make your payment before they charge a late fee. The fee may vary depending on the lender, but they may charge $25-$50. Make sure you read your auto loan agreement which will spell out any and all fees that come along with the loan.
QUICK TIP: Steer clear of being late on an auto loan because it can result in your credit score increasing and your vehicle being repossessed. 
  • Prepayment penalty fee: When you pay off an auto loan before the end of its scheduled loan term, some lenders charge a prepayment penalty fee.  (Psst... Skyla doesn’t do this) Check your loan agreement and contact your lender to learn if they charge prepayment penalty fees. 

bubble-blue-car-on-roadcar insurance

Having a vehicle means you need protection in case there's an accident. The cost of car insurance depends on many factors - the insurance provider, your location, your age, credit score, driving experience, annual mileage, etc. Do some research before selecting your car insurer to make sure you get the best rate.  

Stack-of-Coins-Iconwhat other costs are included when financing a car?

  • Gas costs: Your car will always need fuel to get you where you need to be. Whether it is premium fuel or regular fuel, you can look up how much fuel your car takes in the owner’s manual. You may also see it on the gas cap or even by the fuel gauge. Look for the minimum octane rating.    
  • Maintenance: 
    • Oil Change: Experts suggest getting your oil changed every 5,000 to 7,5000 miles on new vehicles. For older vehicles, an oil change may need to be done more frequently. The average cost is between $35 - $75 per change.  
    • Tire rotation: This cost comes as you drive your car more regularly. The Highway Traffic Safety Administration recommends drivers replace their tires every six years. Replacing tires can be costly and depends on the quality of tires and the vehicle you have. Tires typically cost $400 - $1,800. 
    • Brake pad replacement: How often do you use your brakes? Do you drive on freeways often? If so, you’ll need to save up in case you’ll need a replacement. Brake pads can cost anywhere between $35 - $150 for all wheels which doesn't include labor costs.
  • Annual Vehicle Registration and Property Taxes: ​In North Carolina, “you must pay both your vehicle’s registration and the property tax [each tax cycle]. The only exceptions are if you have just bought a vehicle or have just moved to the [the state].” To determine how much in property tax you’ll pay, use the NCDOT calculator.
  • Vehicle Inspections: These inspections are required by the state, and check the car’s emissions, headlights, breaks, and steering to ensure it’s safe to drive on roads. You won’t be able to register your vehicle if it fails inspection. North Carolina state vehicle inspection fees are $13.60.


Checklist-Iconhow to plan for these expenses

  • Have a budget in place: Need help budgeting for an auto loan here are tips that’ll help.  
  • Get a cosigner: If this is your first loan and you need to build credit, you can add a cosigner to your loan if you're approved for an auto loan. The cosigner will be responsible for the auto loan as well if you fail to make your auto loan payment. 
  • Review and improve your credit score:  Your credit score plays a role in you getting approved for an auto loan. Lenders review your history to see if you are worthy of lending. Here are more specifics on the credit score you'll need to get an auto loan. Learn More > 
  • Getting prequalified:  When officially applying for an auto loan, your credit score gets hit. You can learn you’re chances of approval before officially applying with this pros and cons article. Here’s How>
  • Your auto loan options: This will help you understand where you go to get an auto loan other than at the dealership. You don't have to limit your auto loan search to dealerships. Other lenders provide the same amount of loans with lower interest rates.  Learn More>


Auto-Loans-Iconready for an auto loan? here's what you need

When you're ready to apply for an auto loan, here's a checklist of documents you'll need with your application to help speed up the auto loan decision process:

Learn More


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Our Customer Service Representatives are here for you here and ready to assist! You can get in touch with us herecall us at 704.375.0183, or visit any of our branches




As the Content Specialist and author of the Learning & Guidance Center, Yanna enjoys motivating others by uncovering all that's possible in the world of finance. From financial tips and tricks to ultimate guides and comparison charts, she is obsessed with finding ways to help readers excel in their journey towards financial freedom.

learning & guidance

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Understand the upfront, monthly, and occasional costs associated with an auto loan.

Step-2 figure out what credit score is needed

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