You negotiated a price for a new-to-you used car, and it sounded pretty fair…at first. Now you’re looking at the list of fees; with the sales tax, car insurance, and other fees, you might wonder, “Just how much am I going to end up paying here?”
Used Car Taxes and Costs
Here’s a breakdown of the used car taxes and costs you can expect when you buy a used vehicle.
Vehicle Registration Fee
The state charges this fee to register a car, assign a title, and cover the cost of licensing. If you buy the car from a dealer, he or she will usually take care of the vehicle registration fees in the office. Also determine if your state requires smog and emissions testing and whether the seller is responsible for providing a smog certificate (having passed an emissions check).
Auto Sales Tax
The auto sales tax for a car works the same as the taxes you pay on anything you buy in a store, except the percentage on a car is significantly higher.
The dealership charges the document fee, sometimes called the doc fee, to file all the necessary paperwork. In some states, the document fees are capped, so the dealer cannot take advantage of a buyer.
Trade-In Sales Tax
Different states handle the trade-in tax differently – in some states, if you trade one car in for another, you receive a tax break; in others, you pay tax on the full amount of the new used car and the trade-in doesn’t affect the amount.
This is a catch-all title for fees that the dealer adds to the price of the car; “shipping and handling,” “dealer prep,” and “advertising” are three of the most popular dealer fees. The savvy buyer can often negotiate them away.
While shopping around, you might also consider ordering a vehicle history report for cars you’re seriously considering. In some cases, a seller might provide such a report. For more tips on making a smart purchase, check out our Used Car Buyers Guide.