Which Taxes and Fees Must Be Paid On the Purchase of a New Vehicle?

People often focus on the invoice price when deciding what kind of vehicle they can afford to purchase, overlooking the taxes and fees which must be paid on the purchase of a new vehicle. These fees and taxes vary between states, but some are common to most new car purchases nationwide.

The most costly of all taxes and fees when purchasing a new vehicle is usually the state sales tax. All but 7 states have a sales tax, and the rate can range from 2.9% to 8.75%. Many cities and towns have a local sales tax in addition to that imposed by the state.

New car buyers are usually charged a destination fee. Car manufacturers charge dealerships this fee for transporting the vehicle to the dealer's lot, with dealers almost always passing it on to consumers. Savvy customers can sometimes negotiate with the dealer to waive or lower this charge.

Another common set of fees when purchasing a new vehicle are the fees for tags and registration. These fees are passed directly to the state's Motor Vehicle department to register the car in the new owner's name and obtain license plates. Some states also require new vehicles to be inspected for safety and adherence to emissions standards, which adds to the registration fee.

Car dealers are usually required to report fees and taxes on the new car contract, and buyers should understand which can and cannot be negotiated so they can get the best deal.