Do You Pay Sales Tax on a Used Car?
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You pay sales tax on the purchase of a used car, just as you do a new vehicle.
If your state has a sales tax that applies to vehicle purchases, you’ll have to pay that tax regardless of whether the car is new or used — and regardless of whether you buy from a dealership or an individual seller.
How much you’ll pay in taxes will vary depending on the car’s value, where the car will be registered, and any other taxes your state levies on car purchases.
How much is used car sales tax?
Typically, most states charge between 5% and 9% for their sales tax, says Ronald Montoya, senior consumer advice editor at Edmunds. So, if your used vehicle costs $20,000 and you live in a state that charges a 6% sales tax, the sales tax will raise your car’s purchase price to $21,200, excluding any additional taxes or fees you may owe.
Not every state charges a sales tax on cars, though. The following states don’t charge a sales tax:
Alaska.
Delaware.
Montana.
New Hampshire.
Oregon.
In addition to state sales taxes, the county and city you live in may levy sales taxes of their own. For example, a resident of Tacoma in Pierce County, Washington, would owe not just the state sales tax of 6.8%, but also county and city sales taxes which might bring the total up to 10.4%.
In addition to your state’s sales tax, some states charge a motor vehicle excise tax, a personal property tax or other taxes specifically on vehicle purchases. Around half of all U.S. states charge an additional vehicle property tax, says Matt Dundas, Carvana’s director of finance. Check with your state’s department of motor vehicles to ensure you’re paying all required taxes.
In most states, a credit for taxes you already paid on your trade-in will reduce the amount of sales tax you owe on the new vehicle.
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Can I avoid paying sales taxes on my used car?
Unfortunately, you cannot avoid paying sales tax on a used car.
If you buy a used car from a dealership, the dealer should include any city, county or state taxes you’re responsible for into your car’s final purchase price. “When you buy from a dealership, oftentimes they’ll fold [your taxes] into the total price of the loan,” says Montoya.
If you buy a used car from a private seller, you’ll pay the taxes yourself when you go to register the vehicle. DMV officials will charge you a sales tax based on the market value of your vehicle, typically by using a company like Kelley Blue Book, an auto research and valuation company, or by looking at similar car sales in the region to determine your car’s value.
“I don’t think people can just get away with saying they paid $5,000 for something that costs five times as much,” says Montoya.
You also cannot avoid paying sales taxes if you buy in a different state without a sales tax. Your sales tax will be determined based on where you’re registering your car, not where you purchase the car. So, if you’re going to register your vehicle in a state that charges sales tax, you’ll have to pay that sales tax. You pay sales tax on a used car, but how much you’ll pay depends largely on which state you live in.
