Purchasing a new car is a big decision. The government also takes its piece of the pie by charging taxes on your new car purchase. By doing some research with your car dealer and county tax office, you can determine the sales tax before closing the deal.
Location
The sales tax of the car purchased depends on location. Many states base this tax on the county where you reside. If you buy the car outside of the country you live in, confirm the tax before signing an agreement. Confirm this information by talking with your county tax office or dealer's finance manager.
Trade-in deducted
Before calculating your sales tax, factor in a trade-in. If you trade in your old vehicle, the dealer will provide a trade-in value. The trade-in value will be deducted from the new car sales price. The new car sales tax will be based on the amount after the trade-in.
Cash incentives
In addition to trade-ins lowering the new car price that is taxable, so do cash rebates. Many auto companies offer thousands of dollars "cash back." You won't get the dollars back but will have your new car price deducted by the rebate amount. And you will be taxed on the price less the cash incentive. For instance, a $20,000 new car price with a $1,000 rebate will result in $19,000 that is taxable.
Calculate tax
Determine the car price by taking the original price, deduct the trade-in value and cash incentives. Then, take the county sales tax rate, multiply that with the final car amount and you will have your final tax. For example, a $20,000 vehicle with a 7.5 percent tax would result in a taxable amount is $1,500.
Total cost
After calculating your sales tax, the tax will be added to your vehicle cost. When you finance a car, the sales tax is figured into your final financing.
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