The used car market is just as lucrative as it always has been. While lots of people are steadfast in purchasing only new cars, there is a whole other group of people who loyally purchase cars that have already been owned by other people.
It is these people that keep the used car marked moving.
When you purchase a brand-new car, then you will be required to pay sales tax on that car. But what about used cars? Do you have to pay sales tax on them?
In this guide, we’ll be taking a look at whether, or not, you have to pay sales tax on used cars, and how this impacts both the buyer and the seller. So, if you want to find out more, keep on reading!
What Is Considered A “Used Car”?
First things first, let’s establish exactly what we mean when we say “used car”. Well, this term is pretty self-explanatory, when we say “used car”, we mean a car that has been used.
When you purchase a brand-new car, you will be the first person to drive it out of the car dealership. Before you, the car will not have been used.
In contrast, a used car is a car that will have had previous users. A used car doesn’t necessarily have to be old, it simply needs to have been owned by another individual before you.
You can get used cars that are as young as one-year-old. As we have said, there are a lot of people who are steadfast in purchasing only brand-new cars. It is these people who keep the user car market moving.
So, in short, a used car is a car that is not brand-new. Used cars tend to have a fair amount of kilometers on the clock, and they tend to be at least a couple of years old.
However, it is possible to get a car that is younger than this. If your car has not been made to order, and you weren’t the first person to drive it out of a car dealership, then it is probably a used car.
Do You Have To Pay Sales Tax On A Used Car?
Now that we have established what a used car is, let’s take a look at if you have to pay sales tax on them.
Sales tax is something that most States implement, and it is essentially a small percentage that is given to the government via tax when you sell or purchase a vehicle. All new cars include a sales tax, but do used cars?
Yes, used cars do have a sales tax, and so you will have to pay a sales tax when you buy a used car. That is assuming that you live in a State which implements sales tax (which is the majority of them).
Most States implement sales tax on cars regardless of whether the car is new or used, and also regardless of whether the car is bought from a dealer or a private seller.
Sales tax is implemented by almost all the States in the USA. At the time of writing, the only States which do not implement a sales tax are New Hampshire, Oregon, Montana, Delaware, and Alaska.
Outside these States, you will be required to pay sales tax when you are purchasing a new car.
Car sales tax does cause confusion with some people as they struggle to understand when the sales tax is paid. Due to the use of the word “sales” a lot of people think that it is up to the seller to pay the tax, not the buyer.
But this isn’t the case. Let’s take a quick look at how car sales tax works.
How Does Sales Tax Work?
When you purchase a brand-new car, the sales tax will be paid by the dealer.
The cost of the sales tax will be included in the purchase price of the vehicle, so when you pay the dealer, they will then pay the sales tax. However, when you buy a used car, the process is slightly different.
If you are purchasing a used car from a used car dealership, then the process will be the same as if you were buying a new car.
The total cost of all taxes that need to be paid on the purchase of the vehicle will be included in the total price, so when you pay the dealer, they will then pay the sales tax with your money.
However, if you are buying a used car privately from an individual, then the process will be different. Instead of the taxes being included in the purchase price of the vehicle, you will have to pay them after you have purchased the car.
Private sellers do not have any obligation to arrange the sales tax for your vehicle, instead you can do this yourself when you register yourself as the vehicle’s new owner. Now that we have covered that, let’s take a look at how much sales tax usually is.
How Much Is Used Car Sales Tax?
Sales tax on vehicles is not a flat rate, instead it is charged as a percentage of the value of the vehicle. The exact percentage will depend on where in the USA you are purchasing the vehicle, but generally it ranges anywhere between 5 and 9%.
If you are purchasing a used car from a dealer, then you likely will not notice this percentage as it will be included in the total cost of the vehicle.
The time when you really have to consider the sales tax is when you are purchasing a used car from a private seller, as you will have to pay this on top of what you are paying the individual who you buy the car off of.
In short, yes, you do have to pay sales tax on the purchase of a used car. Used car dealerships will include this in the total cost of the vehicle.
But, if you buy privately from an individual, you will need to pay the sales tax yourself when you register the vehicle as yours.
Thank you for reading!