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Is sales tax included in the balance of a car loan?
I know that sales tax can get rather expensive on a new car, and I don't know if I have the cash for both a down payment and the tax. Is sales tax rolled into the car loan? Or do I have to pay it with cash?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
If you purchase the car from a dealer (whether new or used), your sales tax and related fees are almost always included in the balance of the
car loan
. This is because sales tax is part of the dealer’s invoice or buyer’s order.If you want to pay cash for sales tax and fees separately: Make your desire to do so clear before you sign the loan.
If you’re financing a car from a private seller: You’re more likely to have to pay the taxes out of pocket. Typically you’ll pay these taxes when you go to retitle the car at the DMV. However, some lenders may allow you to roll this into your loan if you ask.
Remember: Rolling sales tax into your loan balance means you’ll have to pay interest on it for the duration of the loan term. Therefore, you can save money if you can pay for taxes upfront. Still, most people who finance vehicles tend to roll these fees into their regular loan payments.
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- Gregory R.
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