Is sales tax calculated before or after down payment

If youre thinking about buying a car, you likely know that the advertised price probably wont be the price you pay. Thats because youll have to add taxes and fees, and that means y

Is sales tax calculated before or after down payment

If youre thinking about buying a car, you likely know that the advertised price probably wont be the price you pay. Thats because youll have to add taxes and fees, and that means you might end up spending a few thousand dollars more than the price you were initially hoping for.

So when it comes to financing a car, how do you account for taxes and fees? Are they rolled into your payment? Or do you pay them up front? Its a good question, and we have an explanation.

How to Know if Car Taxes and Dealer Fees Are Included

If you finance a car through a dealership, car taxes and dealer fees are almost always included in the payment. Thats because the finance amount is usually based on the cars out-the-door price, which includes all taxes, fees, and additional extras, such as an extended warranty.

Thats why adding a dealer option will slightly increase your monthly payment, because its rolled into the financing. Its also why, in many states, the dealer can get your license plates for you because theyve collected the taxes you owe on the vehicle.

Read our story about dealer fees and destination charges to learn the breakdown of costs.

When Car Taxes and Fees Are Not Included

There are, however, times when taxes and fees dont get included in your vehicle financing. The primary example of this is when youve arranged your own car financing. Typically when you arrange your own financing, youre buying a used car from a private seller or you receive an excellent interest rate from your bank or credit union for a new or used vehicle and choose to use their services rather than a dealerships financing.

In many cases, taxes and fees can be included in this type of financing. Youll just have to plan for it.

Show up at your dealer with a $25,000 bank check for a $25,000 car, for instance, and youll run into some problems. But if you have the dealer tell you the out-the-door price before you get the bank check, you should avoid any issues.

If you buy a car privately, however, you generally wont be able to roll taxes and fees into the loan. Thats because a private seller isnt set up to collect taxes for the state, and that means youll usually be on the hook for these taxes when the time comes to register the car. In some cases, you might be able to ask your bank for a little extra money on the loan to cover this sort of situation, but they might not always provide it.

What About Leasing?

Most states treat the taxes on leased cars just like they do regular financing. That means youll be able to roll the sales tax and other fees into the lease payment rather than pay up front.

However, some states make you pay the full amount of a cars sales tax when signing a lease. This may seem like a big number but just remember: You wouldve paid this figure anyway had you rolled it into your lease payments.

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Editors Note: This article has been updated for accuracy since it was originally published.


Maria S Richter March 1, 2021 At 6:13 pm

on a new car should car tax be put on the bill before the buy out priceReply

Larry Andrews April 11, 2020 At 8:11 pm

I bought a used car and charged a doc fee and processing. What is the difference?Reply

Mark Cunningham February 10, 2018 At 8:00 pm

When financing a new vehicle purchase, do I pay on the total price or the amount paid after down payment?Reply

Tom Todisco January 15, 2018 At 8:40 pm

Ive leased a Ford through Ford credit and I was told by the dealership that they require excise tax be paid in your payment. However, they then apply sales tax to the full payment. Shouldnt the sales tax come after the base payment? Doesnt this mean theyre taxing the tax? And obviously, Im paying more because of there formula. The worst part is that excise tax is rolled into my payment and therefore no way to deduct the amount of the tax come tax time as Ive done on every one of my cars. It seems like a ruse to get more money from me except I cant figure out who benefitsI know its not me.Reply

Jimmy Smith February 12, 2017 At 6:01 pm

what if you pay the taxes and fees up front yourself? And how does this works when your buying a vehicle outside of your state?Reply« Older Comments

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