Understanding Used Car Taxes and Fees

January 17, 2019 4:45 pm

Used car taxes and fees may seem complicated. They don’t have to be. Take them one by one, and they’re easy to wrap your head around. Let’s start with dealership fees and move on to sales tax on used cars, covering everything in between one at a time:

Dealership Fees

Not all dealerships will institute each of these fees, and some may have others. These are just some of the common ones you may encounter:

Documentation Fee: This concerns the preparation of any paperwork involved in the sale. This includes the sales contract itself. Often, this fee is legally regulated. When it is, that means it can’t be negotiated.

Vehicle History Report Fee: This simply covers the cost of a vehicle history report. Such a report reveals the vehicle’s history including ownership, accidents, and maintenance.

Trade-in Fee: When you’re trading in a vehicle toward the purchase of a used car, there may be a trade-in fee involved. This is attached to how difficult it may be for the dealership to market your trade-in. This can often be negotiated.

Advertising Fee: This is a fee to cover the cost of advertising. It may be charged by the manufacturer or the dealership. Often, the fee can be negotiated away.

Warranty Fee: Certified pre-owned vehicles will usually come with warranties. These warranties won’t involve an extra fee, but an extended warranty that goes beyond basic coverage will.

Credit Insurance Fee: What happens if you become unable to pay off a car loan? Credit insurance covers this. Your car insurance may already cover this fee, so check with your insurer first.

DMV Fees

Some used car taxes and fees are associated with the state and not the dealership.

Title Transfer Fee: This is the fee associated with transferring the car’s title. A dealer will walk you through this.

Registration Fee: You must also register your new car. Again, a dealer can help you through this step if you’d like.

Sales Tax on Used Cars

There’s a sales tax associated with purchasing a new car. In Florida, this is 6% of the purchase price minus the value of a trade-in.

Of course, you’ll also need car insurance on top of this. Depending on whether you purchase your car outright or finance it, you may be subject to different car insurance requirements.

Use the Dealership

You probably notice that in several areas outside dealership fees, it’s stated that a dealership can help you figure out the totals of DMV fees and taxes. Often, they should volunteer this because it helps frame a realistic picture of the total cost of a new used car. You’re making a major purchase and they’re more familiar with the industry. Take advantage of the dealership’s knowledge in order to make these assessments accurately.

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