How to Calculate Taxes on a Car

Unless you live in a state that does not charge sales tax on car purchases, such as Delaware or Montana, you're going to have to calculate the sales tax you'll pay on your new vehicle. Because of the high price tag of many cars, this sales tax cost is often significant. How you calculate your sales tax depends on whether you've chosen to buy or lease.

Instructions

Buy

1

Negotiate your car purchase with the seller until you agree on the final sales price. This may be different from the MSRP or sticker price. For this example, assume you've negotiated to buy the car for $7,000.

2

Multiply that final figure by the state's sales tax percentage (seven percent for this example, which equals $490).

3

Pay the sales tax with your purchase ($7,490 in this example) if it's a cash transaction. Give the dealer the extra money for sales tax at closing, along with any additional money for a down payment if you're getting a loan for the vehicle. You can also allow the dealer to build the sales tax figure into your loan.

Lease

4

Determine the monthly lease payment. Ask the salesperson for an estimate of the base payment amount if you're still in the browsing stage of leasing a new car. Often the dealer will advertise this monthly payment right on the car, which doesn't include taxes yet. Assume a lease payment of $200 per month for this example.

5

Determine the sales tax percentage in the state where you're purchasing the car. For this example, assume the state's rate is seven percent.

6

Multiply the sales tax percentage by the monthly lease payment. In this case, the sales tax is $14 per month. Add this sales tax figure to the monthly payment. States use this method for leases so you're only charged on the amount of the vehicle you're using during the lease (called the depreciation). The downside is you have to pay tax on the finance charges as well.