What Taxes are Due for Buying a Used Car?

Buying a used car has some advantages over purchasing a new car. The most obvious advantage is the much lower price for a used car after discounting the new car depreciation. When buying a new car, the value drops precipitously almost immediately. Buying a new car that is even only a few months old with just a few hundred miles can save a large amount. When buying a used car, however, there are still various taxes due paid to different governments. Tax amounts paid on the purchase of a used car vary depending on location. Different municipalities, counties and states have different taxes rates. Also, not all areas will have the same taxes required. Some will have local sales taxes while other have only state taxes, and there are those areas that have both.

Sales Tax

Many localities charge a sales tax on the purchase of consumer goods. The tax is calculated as a percentage of the sales price and is added to the total amount due. Some states and municipalities have a maximum sales tax. South Carolina, for example, charges $300 maximum sales tax. As the South Carolina state sales tax is 6 percent, this means sales taxes are a percentage of the purchase price up to $5,000. Any amount over this will still see a $300 sales tax.

Depending on the location where the used car is purchased, there may also be local sales taxes added to the final total due. Local sales taxes are calculated on the sale price, not the sale price plus any taxes calculated previously. For example, a 5 percent sales tax on a $4,000 used car would be $200. If there is a local sales tax of an additional 1.5 percent, the tax would be an additional $60. The local sales tax would not be calculated on $4200 or a $63.

Property Tax

Some states and localities charge property taxes on used-car purchases. The property tax must be paid in order to register the vehicle and receive license plates. Property taxes are calculated based on the market value of the vehicle, not the actual sale price. Also, if a car is sold at auction and there are past-due property taxes (possibly the reason the car was auctioned), the new owner may be required to pay the past due property taxes to take title to the car.

In some states and localities additional mileage amounts may alter the property tax total. If billed for a property tax amount on the used car and the mileage is over the specified amount, an appeal may reduce the total amount of property tax due.

Luxury Tax

Certain makes and models of automobiles may require paying a luxury tax on the used car sale price. Usually, the luxury tax amount is determined by the vehicle's market value. Also, as with some sales taxes, the luxury tax may have a cap. Whether the used vehicle has a value of $80,000 or $450,000, the luxury tax amount will remain the same.