What taxes and fees should I prepare for when buying or leasing a car?
It’s a story that a lot of people know all too well. They fall in love with a car that has a price tag at the top of (but still within) their budget. What they don’t consider before heading to the dealership to sign papers are all the extra costs and fees that come with buying or leasing a new car. Those unexpected costs can eventually push their dream ride over their budget. One of those extra costs is sales tax. Whether you’re buying a new car or a used car, or even leasing a car, you’ll have to pay state sales tax.
How much sales tax will I pay if I’m buying a car?
Depending on the state and county that you live in, sales tax can vary. Here in Salt Lake County, we average a 6.85 percent sales tax. So when you are calculating your max budget, you want to make sure you add on that sales tax percentage so you don’t go over budget. For example if you decide to buy a car in Salt Lake County with a sticker price of $25,000 you would end up paying about $1,700 in sales tax.
Will I still pay sales tax if I’m leasing a car?
If you decide to lease a car, sales tax is a little different. Unlike a standard car purchase, a lease requires a tax to be paid on the down payment (if you’re required to make one) and on monthly payments. Each month, your payment will be taxed, too. While this sounds awful, it’s actually not that bad. This way, you’re only paying taxes on the car for as long as you lease it. A couple of states, like Texas, do require you to pay the full amount of the sales tax up front when you lease a vehicle.
So before you buy or lease your next car, we suggest knowing your state and local sales tax rates and factoring that extra cost into your budget. That way, you’ll avoid any unexpected fees on the day you drive your new car home.