Ten Unexpected Costs Every First-Time Buyer Should Know

Author: Nikhil Ramchandani •Published on: 12/31/2025•5 Minutes
Overview:When buying a first car, it is often observed that buyers generally focus on the ex-showroom price, but that's not what you actually pay. There are several hidden charges and extra costs that can significantly increase your financial burden. So to help you make an informed decision and avoid any last-minute surprises at the dealership, we've detailed a breakdown of hidden charges that can substantially impact your buying decision.
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Key Highlights:


  • Ex-showroom price isn’t the final cost. Hidden charges like handling fees, TCS, and loan processing can add significantly.
  • RTO and state taxes matter. Costs like hypothecation, green cess, and HSRP vary by state and add up.
  • Optional add-ons can inflate the bill. Accessories, extended warranty, and coatings are often overpriced — consider negotiating or skipping them.



Handling Charges


Dealers often charge handling or logistics expenses to buyers. This covers the transportation cost of the vehicle from the manufacturing plant to the showroom. These charges may include not just the transportation cost but also the expenses related to vehicle storage, cleaning, pre-delivery inspections and administrative processing. However, it is worth noting that automakers generally include basic logistics into the ex-showroom price, so additional dealer-imposed handling charges can sometimes be negotiable or even disputed.


Loan Processing Fees


Your financier will charge you a loan processing fee, typically ranging from 0.5% to 2% of the sanctioned loan amount. This fee covers the cost of evaluating your application, verifying documents, and administrative work associated with disbursing the loan.


Hypothecation Charges


If you're financing a car through a bank or NBFC, your vehicle will be registered with the RTO under hypothecation until the loan is repaid. Hence, a small hypothecation fee will be charged during registration. One needs to remove the hypothecation later after clearing the loan, which involves another cost. This is necessary to establish your sole ownership. In short, buyers need to include these costs as well in their car budget planning.


TCS (Tax Collected at Source)


TCS is a tax charged by the dealership under Section 206C of the Income Tax Act when you buy a car priced above ₹10 lakh (ex-showroom). It is generally 1% of the sale value. However, it can be claimed later as a credit against your total tax liability when you file your income tax return.


FASTag Charges


FASTag is mandatory in India for all vehicles, and dealers issue the FASTag during the delivery of a new car. While the FASTag cost is small, the wallet top-ups make it an important aspect to consider when calculating the total cost and convenience factors involved in owning a vehicle in India.


Green Cess and Road Safety Tax


Green cess and road safety tax are environmental and safety-related levies imposed by various state governments in India, including Delhi, to discourage pollution and enhance road safety infrastructure.


These are state-specific taxes and can vary in nature. They add to the overall ownership cost of vehicles and are collected either at registration, renewal, or during specific mandatory tests.


Number Plate and HSRP Charges


High-Security Registration Plates (HSRP) and colour-coded stickers are now mandatory in most states. While some states include this in RTO fees, others may charge it separately. For four-wheelers, the cost generally ranges from ₹800 to ₹1,500, depending on the state and vehicle category.


Extended Warranty


Dealers often push to buy an extended warranty, which can cover the vehicle for up to 5 to 7 years. However, it is an optional add-on, and one should assess whether it is truly necessary, especially when buying a car known for its reliability.


Essential Accessories Pack


This is one of the most common hidden charges, and dealers may insist on selling you an essential accessory kit that can cost you anywhere between ₹5,000 and ₹25,000. It may include floor mats, mud flaps, door visors, a car cover and seat covers.


Miscellaneous Add-ons


Be cautious about dealers' add-ons like ceramic coating, underbody rust protection, anti-theft devices, and Annual Maintenance Contracts (AMC). While useful, these extras are often overpriced at the dealership. So, we recommend that you compare prices elsewhere before agreeing.


Plan as Per the On-Road Price


When planning for your dream car, you should always budget the full on-road price to avoid any financial surprises. Understanding these hidden costs will help you plan your budget better and ensure a smoother buying experience.


FAQs


1. What are some common hidden costs when buying a first car?
These may include dealer handling & documentation fees, Tax Collected at Source (TCS), loan processing fees, FASTag charges, number plate charges, green cess, road safety tax, and optional add-ons like accessory packs, roadside assistance, AMC and extended warranty packages.


2. Are dealer handling or logistics fees mandatory?
These fees cover transportation charges for delivering the car from the manufacturing plant to the showroom. However, these may sometimes be negotiable.


3. What are some optional dealer add-ons I should accept?
Not all dealer add-ons are a rip-off. Some optional extras can be worth the money if priced fairly and suited to your needs. Some of these include extended warranty, essential accessory kit and zero depreciation insurance.