Are Taxes and Fees Included in Car Financing?

Car Taxes and Fees Quick Facts

• Taxes and dealer fees are typically included in the payment when you finance a car through a dealership.
• Dealer fees can range up to 10% of the vehicle’s cost on most vehicles. Some are negotiable, while others are not.
• If you buy a car privately, however, you generally can’t roll taxes and fees into the loan. Most states treat the taxes on leased cars just like they do regular financing.

If you’re thinking about buying a car, you likely know that the advertised price probably won’t be the price you pay. That’s because you’ll have to add taxes and fees to your costs, which means you might spend a few thousand dollars more than the price you initially hoped for.

So, when you finance a car, how do you account for taxes and fees? Are they rolled into your payment? Or do you pay them upfront? It’s a good question, and we provide an explanation.

• How to Know if Car Taxes and Dealer Fees Are Included
• When Car Taxes and Fees Are Not Included
• What About Leasing?

How to Know if Car Taxes and Dealer Fees Are Included

When you finance a car through a dealership or another lender, the taxes and dealer fees are almost always included in the payment. The finance amount is usually based on the car’s out-the-door price, which includes all taxes, fees, and extras, such as an extended warranty.

So, adding a dealer option will slightly increase your monthly payment because it’s rolled into the total amount you’re financing. It’s also why, in many states, the dealer can get your license plates for you because they’ve collected the taxes you owe on the vehicle.

Read our story about dealer fees and destination charges to learn about what costs the dealership might pass along to you and how delivery fees are on every new car invoice.

How Much Are Dealer Fees?

Dealer fees can range up to 10% of the vehicle’s cost. Some you’re responsible to pay, such as sales or ad valorem taxes. Buyers of new cars must also pay destination fees, which range from about $1,000 to $2,295 for a 2024 GMC Hummer EV. However, there are dealer fees that show up on your invoice that are pure profit for dealerships. In addition to the standard dealer fees, due to tariffs on imported cars and car parts, you may notice new fees during your next vehicle purchase.

When Car Taxes and Fees Are Not Included

There are times when taxes and fees don’t get included in your vehicle financing. The primary example of this is when you’ve arranged your own car financing. Typically, when you arrange your own financing, you’re buying a used car from a private seller, or you receive a better interest rate from your bank or credit union for a new or used vehicle and choose to use their services rather than a dealership’s financing.

In many cases, taxes and fees can be included in this type of financing, but you’ll have to plan for it.

Show up at your dealer with a $25,000 cashier’s check for a $25,000 car, for instance, and you’ll run into some problems. But if you ask the dealer to show you the out-the-door price in writing before you get the bank check, you should avoid any issues.

However, if you buy a car privately, you generally won’t be able to roll taxes and fees into the loan. That’s because a private seller isn’t set up to collect taxes for the state, and that means you’ll usually be on the hook for these taxes when the time comes to register the car. In some cases, you might be able to ask your bank for a little extra money on the loan to cover this sort of situation, but they might not always provide it.

Should I Include Taxes and Fees in My Auto Loan?

Including car sales tax and fees in your financing reduces the out-of-pocket money you initially pay when buying a car. If you pay them separately, your savings account immediately drops by that amount.

Suppose the dealer fees and sales tax total $3,000. Adding that into your loan lets you keep that money and have it available for an emergency or use for another purpose. However, your monthly loan payment will increase, and you’ll pay interest on the additional amount for the life of the loan. For example, increasing a loan amount by $3,000 at a 4% interest rate over 60 months increases the monthly payment by $55, and you’ll pay $315 in interest for borrowing those funds.

Consider your budget when deciding whether to pay a lump sum now or spread the amount over many months and pay more in the long run.

What About Leasing?

Most states treat the taxes on leased cars just like they do regular financing. That means you’ll be able to roll the sales tax and other fees into the lease payment rather than pay upfront.

However, some states require you to pay the total sales tax on the car when signing a lease. This may seem like a big number, but remember: You would’ve paid this figure anyway if you rolled it into your lease payments.

If you are considering a lease, be sure to check out our monthly list of Best Lease Deals to help you find your next vehicle.

Editor’s Note: This article has been updated since its initial publication.