Understanding Sales Tax on Cars in New Jersey

When purchasing a car in New Jersey, it’s essential to understand the sales tax implications. Unlike some states, New Jersey applies sales tax to vehicle purchases. This tax is based on the purchase price and is collected by the New Jersey Motor Vehicle Commission (NJMVC) or your dealer. Let’s delve deeper into the specifics of sales tax on cars in New Jersey.

How is Sales Tax Calculated?

The sales tax rate for cars in New Jersey is determined by the location where you register the vehicle. As of 2024, the state sales tax rate is 6.625%. However, additional local taxes may apply, depending on the municipality or county. These local taxes can range from 0% to 3.5%, so it’s crucial to check the rates in your area.

To calculate the sales tax on your car purchase, multiply the purchase price by the total sales tax rate (state + local). For example, if you buy a car for $20,000 in a location with a total tax rate of 7.5%, you would pay $1,500 in sales tax ($20,000 x 0.075).

Exemptions and Exceptions

Certain transactions may be exempt from sales tax. For instance, if you are buying a car from a family member, there is no sales tax due. Additionally, if you are purchasing a car for resale, you may be eligible for a resale certificate, which exempts you from paying sales tax at the time of purchase.

Financing and Sales Tax

When financing a car purchase, you have the option to include the sales tax in your loan amount or pay it separately. Including the tax in your loan will increase the total amount financed and result in higher interest payments over time. Paying the tax separately may require a larger upfront payment but can save you money in the long run.

Registering Your Vehicle

After paying the sales tax, you must register your vehicle with the NJMVC. To do this, you will need to provide proof of ownership, proof of insurance, and payment for registration fees. The registration fees vary based on the weight of the vehicle and can range from $60 to $85.

Conclusion

Paying sales tax on a car purchase in New Jersey is an unavoidable expense. Understanding how the tax is calculated and knowing any exemptions or exceptions can help you navigate the process more efficiently. Be sure to research the sales tax rates in your area and factor them into your budget when buying a car in the Garden State.