What is Auto Sales Tax?

Date posted: 07/09/2012

by Nadia Ibanez on
in Buying & Selling

1477 What is Auto Sales Tax?

If you need to buy a car, but don’t want to spend more money than necessary, a used car might fit your bill.

Used vehicles often cost less than new cars and can run quite well, provided the dealer or previous owner kept the car in good working condition.

While a used car can be a smart purchase for a savvy spender, keep in mind that used cars come with auto sales tax. Read on to learn how used car taxes might affect the bottom line of your next car purchase.

Auto Sales Tax Explained

Most states require car buyers to pay a sales tax when purchasing a vehicle. These taxes go directly to the state you live in, even if you purchased the car in a different state.

Dealers typically calculate the cost of auto sales tax based on a percentage of the car’s net retail price, or the price of the vehicle after accounting for any trade-in values.

Most dealerships do not list the auto sales tax as part of the price tag on the vehicle, so, keep this figure in mind when you start negotiating a sale.

How Much Auto Sales Tax Do You Pay?

This varies by state and vehicle. Your local motor vehicle agency will tell you the amount of sales tax you need to pay on the vehicle when you title and register your new ride.

How to Calculate Auto Sale Taxes

Your car’s bill of sale can help you estimate the auto sales taxes you’ll incur on your purchase.

When you provide your bill of sale to the local DMV, your registration official will calculate what you owe based on the price listed on the bill of sale. Generally, this tax ranges anywhere from two to six percent.

Before you buy, you might want to talk to a local car dealer to determine what percentage your state charges in sales tax. This will help keep you from being caught off guard by an unexpected fee associated with your purchase.

When you come to the car dealership armed with a complete knowledge of the fees and taxes you’ll pay, you can make a more informed decision about the purchase price of your vehicle.

Have you ever been caught off guard by auto sales tax? Tell us about your experience in the comments section below.

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About Nadia Ibanez

Since 2006, San Diego resident Nadia Ibanez has inspired others with her words. She has created content and edited copy for luxury print magazines and digital business magazines. She has written about multi-million dollar homes, local artisans, music festivals, travel destinations, health and wellness, and so much more. She has interviewed CEOs of major enterprises and has covered breaking news stories in American technology, social media, retail, hospitality, food, among others. More articles by Nadia Ibanez

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