Can You Roll Sales Tax Into a Car Loan?
With so many different fees associated with buying a car, you may be wondering, “can you roll sales tax into a car loan?” Depending on your credit history and lender, you may be able to include sales tax on a financed car into your loan. See how sales tax factors into your budget and find the smartest option for you with Green Light Auto Credit.
Does a Car Loan Cover Sales Tax?
Car loans typically do not cover sales tax, as this is a separate fee from the car’s total value. Lenders evaluate what’s known as “loan to value” or LTV, which is the total amount a lender is willing to extend based on a given collateral. Most lenders base LTV on the car’s invoice price or MSRP, but it’s also common for LTV to hover around 90% of the vehicle’s value, requiring the borrower to pay a down payment.
If you have a strong credit history, lenders may offer a 150% LTV which would allow you to roll sales tax into your car loan. Those with bad credit history may not receive the same opportunity, as adding sales tax onto a financed car will increase the loan’s total and therefore the risk.
Should You Roll Sales Tax on a Financed Car?
Vehicle sales tax will vary from state to state, but combining sales tax with title, tags, and other fees can add up to around $3000. If you have the opportunity to include sales tax in your loan, you should still consider whether or not this is the best move for you.
While rolling tax into your loan means you don’t have to take a big hit to your finances up front, it will make your final total higher and mean that you’ll be paying interest on those fees for the duration of your term. If you can manage to pay your sales tax upfront, it will save you money in the long run.
What to Do When You Can’t Roll Sales Tax Into a Car Loan
If you’re not able to include sales tax on your loan, there are other ways to help compensate for these costs:
- Trade in your vehicle: Adding the value of your current vehicle towards the cost of your new one will help lower the overall total, making your purchase more affordable.
- Shop during sales: Many manufacturers offer cash back specials when you purchase a new car, and that money can go towards your extra fees.
Find Smart Financing Options With Green Light Auto Credit
Does your car loan cover sales tax? Green Light Auto Credit is here to help you work through all available financing options for a savvy investment. Contact us to learn more today!
