4 Hidden Costs of a Luxury Car

You've seen the commercials: an oversized, red bow atop a shiny new luxury car in the driveway. You can all but imagine the new car aroma wafting while an exuberant recipient jumps for joy in his or her jammies.

Luxury cars make a statement. They say something about the owner's arrival into a land of accomplishment. They stand out in a sea of moderately priced alternatives. Heck, they just look better. But, they can also have you scrambling to stay on top of your finances.

Even if you've absorbed the sticker shock and accepted that a new luxury car will cost you more than the comparable non-luxury model, there are other hidden costs that can transform that new car smell into a rotten stench of budget overrun. (See also: 10 New Car Costs the Dealer Is Hiding From You)

Everything costs more with a luxury car. Do your homework before signing on the dotted line.


Insurance is one of the not-so-sexy must-haves that every buyer must reckon with after leaving the car lot. As you would expect, a fender bender with your shiny new luxury mobile will cost more to repair. The insurance company will pass the cost along in the form of higher premiums.

Just how much your insurance costs rise depends on your new car. Let's compare a top-of-the-line Toyota Camry to an entry-level luxury model, the Mercedes C300. A fully loaded Camry in Chicago tops out at $33,000 according to TrueCar.com. Slide into an entry-level C-class Mercedes, standard frills only, starting with a $40,000 price tag.

A quick search on InsuranceQuotes.com shows that as a married woman in her 40s, I would pay $1,500 annually for the typical Toyota Sedan insurance premium. By comparison, I would fork out a whopping $2,689 a year to ensure my new hot Mercedes. That's an additional $1,189 a year, an 80 percent increase, to ride in style.


Fuel costs are another ongoing expense to calculate when considering a luxury car. Luxury cars, with their massive engines, are built for performance, not fuel economy. That's why premium fuel is required to keep these marvels humming. The national average for regular gas prices is $2.48 per gallon, according to AAA. That average jumps to $3.01 for premium prices.

In Illinois, we have the honor of paying even more for gas. Premium prices are currently an average $3.37 per gallon, while regular fuel costs around $2.62 per gallon. So my fuel costs on average per year will cost $1,800 annually for the Mercedes vs. $1,500 a year to drive a Camry, according to a calculator on FuelEcomony.gov.

Maybe you're not bothered by an additional $300 in fuel costs. We're not done yet.

Maintenance and repairs

Repairs will also cost you more for luxury models. The parts are more expensive. Technicians have to be specially-trained to work with the complicated gadgets. Even if you opt for non-dealer mechanics, repairs will undoubtedly add to your cost of ownership as the car ages. Non-luxury cars need maintenance, too, but repairs and upkeep are cheaper.

Toyotas are famous for their new car care programs. Toyota purchases include ToyotaCare, which covers factory-scheduled maintenance costs for the first two years or 25,000 miles. Your oil changes, tire rotations, and brake inspections are covered.

Mercedes, on the other hand, offers a prepaid maintenance package starting at $769. According to MBUSA.com, the Mercedes-Benz website, the package will save you 30 percent on routine maintenance costs over three years compared to paying as you go. This one-time fee covers the car for three years or 30,000 miles.

Once these new car protections expire, the difference between maintenance cost grows. YourMechanic.com ranks the cost to maintain all of the major car brands. Mercedes, not surprisingly, is one of the most expensive cars to maintain — right after BMWs — at nearly $13,000 over 10 years. A Toyota should cost only $5,500 to maintain over 10 years. In annual terms, the Mercedes costs $750 more than the Toyota to maintain. (See also: 6 Cars You Can Drive (Almost) Forever)

Depreciation and taxes

No one walks into a dealership and wonders how much depreciation will impact their cost of ownership. Maybe we should. This hidden cost impacts your car's resale value. Luxury car values continue to drop after standard car depreciation rates tend to level off. (See also: 3 Reasons Why You Should Never Buy a New Car)

The higher cost of maintenance and repairs has a lot to do with that. Think about it. Someone buying your used luxury car is taking on an expensive bill with their new-to-them car purchase. It will cost you more, in terms of lower resale value, to sell your car when you're ready to upgrade.

Kelly Blue Book has a handy tool that will allow you to compare a car's depreciation as a portion of the total five-year cost of ownership. Our Mercedes in this example would lose $27,000 by year five, versus a $16,700 loss for the Camry.

In the end, you may still decide you want the cush Mercedes over the practical Toyota. Either way, go into your decision with your eyes wide open about ongoing costs and total cost of ownership. (See also: Could You Put Away a Million Dollars by Driving a Used Car?)

Sales taxes are another consideration. State taxes vary based on your location, but given the higher purchase price of the Mercedes, you'll pay more taxes on it, too.

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