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Does a car loan include sales tax?
I'm going to finance a car, but I'm not sure if the car loan includes sales tax. Do I have to pay for this out of pocket? Or can I roll it into the loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
That’s a great question! The good news about sales tax, title, and other fees is that, depending on your loan-to-value ratio (or LTV) you have the option to pay for them out of pocket or roll them into the loan.
Your LTV represents how much a lender is willing to loan you for a vehicle. For example, a 100% LTV means that your lender will give you the price of the car in a loan, but nothing extra.
If your lender is willing to give you an LTV of 110% or 120%, you can certainly include sales tax and other fees in your loan. If the fees are exorbitant, though, you should be aware that this may put you
upside down on the car loan
for an extended period of time.Bottom line: If you can afford to, pay the sales tax and fees out of pocket—you’ll save much more money in the long run!
And if you’re buying a new car, don’t forget about car insurance. Financed vehicles need full coverage car insurance per the stipulations of the loan. To get full coverage that won’t break the bank, check out the
Jerry
app! We’ll get you customized quotes from top insurers so that all you need to do is pick the plan that works best for you! (And once you’ve picked one, we’ll even help you switch, too.)Best of luck with the loan!
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- Gregory R.
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