Think that rock-bottom, factory-closeout price is a great deal? Think again.

If you learned to speak Minnesotan from Garrison Keillor on his iconic radio show, “A Prairie Home Companion,” you might know the difference between “not a bad deal” and “a heckuva deal.” But for the large swath of the population who don’t speak Minnesotan, it’s easy to think you’re getting a great deal when all you’re getting is taken.

Even if you’re the type who does your research and crunches your numbers before you buy anything and never fall for fancy sales pitches or hyperbolic marketing hype, once you dig beneath the surface to get at the true cost of something, often what seems like a heckuva deal actually isn’t.

Unanticipated Costs of Buying a Car

There are a few general categories where the unseen or unanticipated costs can really add up and turn a bargain into a bummer. These include interest or finance charges, contract renewals, upselling, planned obsolescence and maintenance expenses.

Take the cost of a new car—the American dream machine. Before you sign on the dotted line, inquire what each of these will add to the sticker price: sales tax; finance charges; shipping and destination costs; plus a whole universe of “fees,” including dealer preparation, manufacturer, floor plan, documentation, compliance, emissions testing and advertising. And think long and hard before saying yes to dubious add-ons like extended warranties, credit insurance and anti-theft devices. The real bottom line might tempt you to reconsider public transportation.

Interest Rates

Another deal-buster is interest charges. If you pay your credit card bills in full every month, take a gold star out of petty cash and skip the next paragraph. But if you’re among the 42.4 percent of Americans who carry monthly credit card debt, you may find it helpful. (Here’s a fun cocktail-party stat: The average amount of that household debt is $15,607, according to

Let’s look at an extreme example. Say you go a little overboard on Black Friday and Cyber Monday and charge $10,000 worth of holiday gifts to a card with an interest rate of 21 percent (the American average).

Thanks to unforeseen circumstances next year, you only make minimum monthly payments (typically the interest plus 1 percent of the balance), and you fall into this pattern. According to’s nifty compounding-interest calculator, it will take you 29 years to pay off the debt in full—and you’ll have shelled out an unthinkable $95,700. Bah humbug indeed.

It’s unlikely you’d take that long to pay off the balance, but even if you took just two years, your interest charges would total $2,080.

If It Sounds Too Good to Be True…

You don’t need a crystal ball to anticipate future costs. You just have to be realistic—and ask the right questions. You might get a heckuva deal on membership to an elite gym, but how long is that good for? How much will it cost to renew? Are there fees on top of joining, like court time, parking or renting a locker or towels?

Likewise, other clubs or organizations might make an irresistible membership offer, but how much will they cost in the long run? Are there minimums you need to spend to stay in, like corporate boxes at new ball stadiums? What about requisite annual donations and tips to the staff? And that cutting-edge gizmo you bought last month? Chances are it’s already been updated or replaced by a faster, smaller, cooler gizmo.

Sometimes the best deal is just sticking with what you’ve got.

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9 comments on “Money Management Tips – Finding the Hidden Cost of Purchases

  • Thanks; I follow almost all of these rules. Like paying your credit card full amount monthly; but sadly my children don’t. And I learned over the years that buying a NEW car is not the best deal.. But a used car is a much better deal now days. Gone are the days that you could hopefully get 90,000 miles from your car, now its not rare that you can drive that used car for 250,000 miles if you take care of it. I would never buy a new car now unless I had won the lottery and money was no object. Love your Bank software and your ideas; will pass to my children and hope a read at least some of it. Jim

  • Hi Suzanne,

    Great article. Another trick is to ask for a product (yet to hit the market), but one you’ve seen and want. It will help you “practice” to deal with and buy you time to really think about the hidden cost of purchases. Yes, many incentives are thrown at you, but they importance of this approach is that one has to step back, cool off and think with your brain and not your eyes. I’ve had rebuttals to my “cooling off” that the sale is only good now or for the day. Finally, it’s important to research and comparison shop to make sure your are indeed getting a “heckuva deal.” Caveat Emptor.

  • Something else to look for? The emerging business model where the fine print assumes you have subscribed to a service, even something that will ship you a “one time purchase” on a regular basis. They put the onus on you, the consumer, to figure out their process to cancel. Surprise charges on your credit card!

  • Awesome article, as aways. I’m planning to buy a car and right now I’m working on the numbers to see exactly how much it’d cost me per month. Then, Banktivity budgeting too will help me with numbers!

  • Wise article.

    I have been a watcher of these hidden costs for some time, your software has certainly helped in forming that picture. I bought a new car about 18 months ago and my choice was largely based on the cost avoidance of running this new vehicle (better fuel consumption, free service for 3 years and extended warranties)

    Another doozie is the hidden cost of working (gas, buy out lunch, coffee, social drinks)

  • Under “If It Sounds Too Good to Be True” please add the “great deal” offered by cable companies. Frequently, the fine print will tell you that the reduced price lasts for only 12 months, after which you pay whatever the cable company is then charging.

  • banktivity helped me with this. once i saw all the expense categories that come with my boat, i see the real cost — storage, winterization, detailing, maintenance, insurance. i still choose to own it, but now i see it does take some resources!

  • Beware of software deals that look to good to be true. The same goes for bundled software Apps that is ridiculously at a low price, free Apps, or download for free. They often fall into one or a combination of these catagories.
    – A planned update is scheduled to come out just after the grace (free update) period that you may have to buy it again or pay at least half the full price.
    – The ‘free’ App may be a beta (test) version that you have to buy once the beta period expires.
    – You may get a bunch of out of date Apps or ones that are in the bundle that you have no use for, but the one you purchased the package for is a subscription or a paid upgrade is shortly to follow.
    – The ‘free’ or low cost version may be a crippled or limited version and you have to pay in-app updates to get the fully functional or ‘pro’ version.

    One other trick that is used is that on bundled packages the sell will offer no refunds if the software is buggy or does not work, referring you to the developer who will not offer a refund because you did not purchase it directly from them. So you are then stuck having paid for a product that doesn’t work or that you can’t use.

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