How Do I Calculate How Much for a Tax, Title and License?by Neil Kokemuller
The agreed-upon price is just part of the total purchase amount when buying a vehicle. In addition, you pay sales taxes, title and registration fees. The specific add-on fees vary greatly based on your state, the vehicle and the net sales price.
Calculate Sales Tax
Your sales tax amount is based on a percentage of the net sales amount, which is the contract price less any trade-in allowances and rebates. Your tax percentage includes city, county and sales taxes.
Sales Tax Examples
Alabama residents pay state and applicable city and county sales taxes of 3.75 to 4 percent as of 2015, according to a CarMax calculator tool. A vehicle purchased for $15,000 with a 4-percent tax rate would incur $600 in sales tax. In Arizona, the state sales tax is 6.6 percent as of 2015, but city and county taxes add up to 3.2 percent on to that for some residents. At the high end, a total tax rate of 9.8 percent means that you'd owe about three times as much in Arizona compared to what you would pay in Alabama for car taxes and fees.
Title and Registration Fees
Title and registration fees are established by each state's department of motor vehicles. In some states, these fees are flat, regardless of the type of vehicle. Other states base your fees on the type and size of the car. In Iowa, for instance, your title fee is $25 at the time of publication. However, the registration fee calculation is a bit more complex. You pay $0.40 per pound for cars 11 years old or less, plus 0.5 to 1 percent of the vehicle's value for cars seven to 11 years old, according to the National Conference of State Legislatures.
State Fee Structure Examples
Alabama has a much more straightforward fee structure, with yearly registration and title fees of $23 and $15, respectively. If you add $600 in taxes based on a $15,000-vehicle purchase at 4 percent, your total tax, title and registration costs are $638. Some states do charge a higher upfront registration fee at the time of purchase based on a percentage of the purchase price. Check with your state department of motor vehicles office to find out.
Connecticut, Georgia and Illinois are among the other states with straightforward fees structures for title and registration. Total costs vary, but generally run between $35 and $200 for both. Louisiana and New York are among the other states that have more complicated registration fee systems, with charges based on the age and size of the automobile. Oklahoma has a sliding descending registration fee scale where you pay a little bit less after every four-year registration cycle. South Carolina bases registration on age, with car buyers paying from $20 to $24 every two years.
You don't have to worry about the math when buying from a dealership, as the dealer normally includes taxes and fees on your contract and pays them on your behalf. Contact your local motor vehicles office for a private car purchase to get tax, title and registration charges for a particular vehicle.
Things You'll Need
- Finance agreement (including purchase price and destination fee)
Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.