![]() But in most cases, you'll pay tax on the full $25,000. For a $25,000 car with a $500 rebate, that reduces the sale price to $24,500. But most states charge sales tax on the full purchase amount before the rebate is applied. Rebates and incentives: Customer cash rebates and other incentives reduce the purchase price of the vehicle. If there is an "N" in the column, it means that you will pay tax on the full amount of your new car purchase and the trade-in has no bearing on the sales tax you are charged. If sales tax in your state is 10%, this will save you $1,000. So, if your new car costs $25,000 and you are getting $10,000 for your trade-in, you will only be taxed on the difference, or $15,000. If there is a "Y" in the "Trade-in sales tax credit" column for your state, you are only taxed on the difference between the new car and your trade-in. Trade-in: In many states, if you trade in your old vehicle, you can get a nice tax break. Here is how different states handle taxes: You probably expect to be assessed sales tax on the amount you pay for your new vehicle, but it might surprise you to learn that there are other tax issues that can also affect your out-the-door cost. And if a dealership is giving you a low purchase price, it might still result in a net savings for you even after the higher doc fee. For example, if a salesperson is giving you especially good customer service, then a higher doc fee might be acceptable to you. Remember that the doc fee is just one factor affecting your shopping experience and your choice of a dealership. When you go car shopping, these estimates are a valuable guide to determine if a dealership is charging close to the typical doc fee in your state. We've taken the data provided by those dealers, calculated a median fee (the middle of the range), and rounded it up or down to the nearest $5. The estimated median doc fees that dealers charge in each state are based on data Edmunds has collected from thousands of dealers nationwide. And keep in mind that dealers also charge sales tax on the doc fee. If the doc fee is substantially higher than your state's median, which is listed in the chart, negotiate the car's price more aggressively to offset the fee. Most dealerships will not negotiate the doc fee itself, but there may be a workaround. If your state does not limit doc fees, find out early in the buying process what the dealership charges. Review the chart below to see how your state handles doc fees. Dealerships may sell a vehicle at an attractive price but then add a high doc fee to the contract. In other states, the doc fees are unregulated. In some states, the doc fee is limited by state law. You could pay more or less than what's shown here depending on your city, state or county.ĭocumentation fee: Dealerships charge car buyers a documentation fee, or "doc fee," to cover the cost of preparing and filing the sales contract and other paperwork. We've listed the "maximum sales tax" rates below, but note that the sales tax on vehicles sometimes varies from the state's usual sales tax rate. Cities and counties frequently add their own tax on top of the state tax, so the amount you pay can vary within a state. For example, a 9% sales tax on a $30,000 car is $2,700. Sales tax: Sales tax on a new vehicle can take people by surprise. The higher costs are designed to offset the losses the state might receive from gasoline taxes since the EV would not use any fuel. Similarly, there are a number of states that charge more for an electric vehicle's registration. Some states are now charging higher registration fees for vehicles that average less than a predetermined mpg. Usually, the more expensive the car is, or the more it weighs, the higher the registration fee. The dealer provides this service for you, saving you a trip to the Department of Motor Vehicles. Vehicle registration fee: This is the amount the state charges to register a new vehicle, assign a title (legal proof of ownership) and cover the cost of license plates. There are three categories of typical new car fees: vehicle registration fee, sales tax and a documentation fee, or "doc fee." Here's an explanation of each: ![]()
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