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# How to Calculate a Tax Title to License a New Car

by Susan Reynolds

When you buy a new car, you have to pay tax on it plus a title fee to get license plates. Some dealerships try to tack on extra costs, so you should know how to calculate your taxes and title fees on your own to avoid being swindled by unscrupulous dealers. When you buy a new car from a dealership, they will handle the paperwork, but you should look it over to be sure there aren't any hidden fees. By being an educated consumer, you can make sure that you are only paying the necessary fees on your new car.

#### Step 1

Look at the final, negotiated sales price of your new car. Ask the dealer about incentives. For example, if the state you live in taxes dealer incentives, you will have to pay tax on that extra money. If the incentive is \$2,000 off the final purchase price, you still have to pay taxes on that \$2,000.

#### Step 2

Ask the dealer if your state gives you a sales tax break if you trade in a vehicle. If so, you will pay taxes on the difference between your new car price and the negotiated value of your trade-in.

#### Step 3

Find out your state sales tax rate (see Resources). Multiply the price of your new car by the sales tax rate to get the total tax bill. For example, if the state taxes are 6 percent, and your car's taxable cost is \$20,000, you need to pay \$1,200 in taxes.

Go to your state's DMV website to find out how much a title transfer costs. Each state sets their own rates (see Resources).

#### Tip

• Print out a Kelly Blue Book information sheet on the value of the car you want before you go to the dealership. This gives you negotiating power.

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