New Jersey charges taxes and fees when you buy, title, and register a new or used car. You must pay New Jersey car sales tax whether you purchase your vehicle in-state or out-of-state. When the time comes for you to buy a new vehicle, make sure you know about the state sales tax and other related fees, so you'll be well-prepared for all the costs of purchasing a car.
What Are the Taxes and Fees When Buying a New or Used Car in New Jersey?
If you buy a car in New Jersey, then you'll need to pay sales tax and other fees when you transfer ownership. According to NJ.com, the state assesses a 6.625 percent sales tax on the purchase price of any used or new vehicle. To calculate how much sales tax you'll owe, simply multiple the vehicle's price by 0.06625. For example, a $15,000 car will cost you $993.75 in state sales tax.
Car buyers in New Jersey also need to pay title transfer and registration fees. As per NJcashcars, these Motor Vehicle Commission fees vary depending on the type of vehicle you bought and how you paid for it. The state's standard title transfer fee is $60. If the vehicle has one lien on it, then it costs $85 for the transfer. Two liens will cost $110. You have 10 days to transfer ownership from the previous owner to yourself. If you transfer the title after this time, then you must pay a $25 late fee.
Titling fees are only due at the time of ownership transfer. Registration fees, however, are due every year. They range from $46.50 to $98, depending on the age and weight class of your vehicle, shares ITSTILLRUNS. These fees include the cost of a new license plate. It costs $5 to transfer existing plates. You must also provide proof of auto insurance when you register a vehicle in New Jersey.
How Much Are Documentation Fees in New Jersey?
Dealerships charge a documentation fee, or doc fee, when you buy a car. This fee covers the cost of preparing and filing paperwork, such as sales contracts and tax documents. State law doesn't limit the amount of doc fees a dealership can charge, so fees vary depending on the dealer and the type of vehicle you buy. In New Jersey, the average cost of a doc fee is $335.
How Are Car Trade-ins Taxed in New Jersey?
When you trade-in your old car at a dealership, they will give you a credit to apply to your new car purchase. For example, if you buy a new car for $20,000 and trade-in your old car for $5000, the new car's purchase price is now $15,000. SalesTaxHandbook states that New Jersey car sales tax doesn't apply to your trade-in value, so the taxable price of your new car is only $15,000.
How Are Car Rebates and Dealer Incentives Taxed in New Jersey?
Manufacturer rebates and dealer incentives are cash deals that help lower the purchase price of cars for buyers. New Jersey car sales tax applies to the vehicle purchase price before you factor in any rebates or incentives. So, even if your out-of-pocket costs for the car are lower than the original purchase price, you still must pay 6.625 percent sales tax on the original price.
How Do I Pay Sales Tax If I Purchase a Car from a Private Seller?
When you buy a car from a private seller, you don't pay any sales tax to them. You'll pay the 6.625 percent state car sales tax when you bring the title to the New Jersey Motor Vehicle Commission to transfer and register the vehicle.
What Sales Taxes Are Due on a Car That Is Bought Out-of-State?
Some states don't charge any state or local sales tax on cars. If you buy a car in Delaware, New Hampshire, Oregon, or Montana, then you won't pay any sales tax to those states, explains World Population Review. If the out-of-state dealer is authorized to collect New Jersey sales tax, then they will apply the right amount to your purchase. No sales tax is due if they're not authorized to collect; however, you'll have to pay New Jersey sales tax when you title the vehicle.
What Other States Have Sales Tax Rates below 10 Percent?
If you're considering an out-of-state purchase, then it's good to know the lowest sales tax rates outside of New Jersey. Most state sales tax rates fall between 5 and 10 percent. Only two states have a minimum sales tax rate lower than 5 percent. Hawaii's is 4.5 percent, and North Carolina charges a minimum of 3 percent. The following states have sales tax rates at or below 10 percent:
- Alaska: 7.5 percent
- Connecticut: 6.35 percent
- Florida: 8 percent
- Georgia: 8.9 percent
- Idaho: 9 percent
- Indiana: 7 percent
- Iowa: 7 percent
- Kentucky: 6 percent
- Maine: 5.5 percent
- Maryland: 6 percent
- Massachusetts: 6.25 percent
- Michigan: 6 percent
- Minnesota: 8.38 percent
- Mississippi: 8 percent
- Nebraska: 7.5 percent
- Nevada: 8.27 percent
- New Mexico: 9.06 percent
- New York: 8.88 percent
- North Dakota: 8.5 percent
- Ohio: 8 percent
- Pennsylvania: 7 percent
- Rhode Island: 7 percent
- South Carolina: 9 percent
- South Dakota: 6.5 percent
- Tennessee: 10 percent
- Texas: 8.25 percent
- Utah: 8.6 percent
- Vermont: 7 percent
- Virginia: 7 percent
- Washington, D.C.: 5.75 percent
- West Virginia: 7 percent
- Wisconsin: 5.6 percent
- Wyoming: 6 percent
What States Have Sales Tax Rates That Exceed 10 Percent?
Some states charge more than a 10 percent sales tax on car purchases. These states are:
- Alabama: 11 percent
- Arizona: 11.2 percent
- Arkansas: 11.25 percent
- California: 10.25 percent
- Colorado: 11.2 percent
- Illinois: 11 percent
- Kansas: 10.6 percent
- Louisiana: 11.45 percent
- Missouri: 10.1 percent
- Oklahoma: 11.5 percent
- Washington: 10.4 percent
Sales tax is a cost to consider when purchasing a car in state or out of state. Save the most on taxes by purchasing a vehicle in New Jersey or in a state with no sales tax. Otherwise, you'll have to pay the out-of-state sales tax at the time of purchase plus the New Jersey state sales tax when you go to title and register the vehicle.
Sources Used:
https://www.salestaxhandbook.com/new-jersey/sales-tax-vehicles
https://itstillruns.com/taxes-used-car-new-jersey-7743237.html
https://njcashcars.com/purchasing-used-car-new-jersey/
http://worldpopulationreview.com/states/car-sales-tax-by-state
https://www.nj.com/business/2018/06/how_nj_taxes_your_car_purchase.html
