In New Jersey, you must pay taxes whether you are buying a new or used car, or whether you buy the car in New Jersey or another state. Here’s what you need to know.
What are the taxes for buying a car in New Jersey for both new and used cars?
When you purchase an automobile in New Jersey, you are required to pay sales tax and additional fees at the time of transferring the car’s ownership. New Jersey assesses a 6.625% sales tax on the purchase price of any used or new car or other vehicle. The amount of sales tax you'll owe is calculated by multiplying a car’s price by 0.06625. The state sales tax on a $15,000 car, for example, will run you $993.75.
If you purchase a car from a private seller, you don't pay any sales tax directly to that seller. You will be required to pay the state tax when you bring the title to the New Jersey Motor Vehicle Commission to transfer and register the vehicle.
The tax on the purchase of a car bought out of state can vary. A handful of states — including Delaware, New Hampshire, Oregon and Montana — don't charge state or local sales tax on cars.
If an out-of-state car dealer is authorized to collect New Jersey sales tax, the dealer will calculate the tax amount and you will be charged sales tax when you make the purchase. If they aren’t authorized to collect sales tax at the time of the sale, you will have to pay New Jersey sales tax when you title your car.
What are the fees for buying a car in New Jersey?
There are also additional fees that must be paid when buying a vehicle or car in New Jersey. In addition to the sales tax fee, you must pay the following fees when buying a car in the state.
Car buyers in New Jersey must also pay title transfer and registration fees. According to the site NJcashcars, applicable Motor Vehicle Commission fees are determined by factors like the type of vehicle you bought and what the selling price was. The state's standard title transfer fee is $60 and if the vehicle has a lien on it, the transfer costs $85. Two liens will cost the buyer $110. You have 10 days to transfer ownership from the previous owner to yourself, and if you transfer the title after this time, there’s a $25 late fee.
Applicable title fees are due only at the time of ownership transfer, but registration fees must be paid yearly. They range from $35.50 to $84 for basic vehicles, depending on the age and weight class of the vehicle. Car owners must pay for a new license plate. The cost of a standard plate is $6. Car buyers must present proof of car or vehicle insurance when registering a vehicle in New Jersey.
How are car trade-ins taxed in New Jersey?
Trading in your vehicle to a dealership offers benefits including savings on sales tax. For example, say you trade in your old car valued at $5,000 for a used car selling for $15,000 at a dealership. You’ll only be responsible for sales tax on $10,000 as opposed to the full purchase price. In addition to avoiding the hassle of selling the car yourself, trading in your vehicle can be rewarding.
According to the New Jersey Consumer Auto Tax Guide, a trade-in credit is permitted only when:
- The vehicle traded in is a motor vehicle as defined in the NJ Sales and Use Tax Act.
- The purchaser trades in a motor vehicle to a registered motor vehicle dealership that takes the trade-in for resale.
- The contract for purchase of the motor vehicle and the trade-in are done at the same time.
How are car rebates and dealer incentives taxed in New Jersey?
Some dealerships in New Jersey may lure buyers with incentives and discounts. For instance, dealerships could offer a $1,000 rebate on a $25,000 car. Your out-of-pocket expense would be $24,000. The NJ sales tax for cars is charged before applying any rebates or incentives.
Another way to reduce your tax burden: Go green. The New Jersey Legislature exempts residents from state sales tax on the purchase or lease of a zero-emissions vehicle, which includes battery electric vehicles but not plug-in hybrid electric vehicles, according to ChargeUp New Jersey. With the current sales tax rate at 6.625%, this is a significant incentive that could help you shave hundreds or possibly thousands of dollars off the vehicle cost at the time of the sale.
To apply this incentive at the dealership, the buyer must fill out a sales tax Exempt Use Certificate (Form ST-4). The state Environmental Protection’s Drive Green site lists eligible vehicles.
How do out-of-state car purchases work in New Jersey?
When you purchase a car outside New Jersey, in addition to any applicable sales tax, you must register a car in New Jersey to drive it here.
Under state law, you have 60 days, or 120 days during a public health emergency, to transfer title and registration. You’ll need to make an appointment and bring your current ID, the vehicle’s title and insurance information.
To streamline the process, complete the required forms before your appointment to register the vehicle. These forms include the universal title application (Form OS/SS-UTA) and a vehicle registration application (Form BA-49).
How do taxes work with private sellers in New Jersey?
When a car is purchased from a private seller, no tax is paid to the seller. State tax (6.625%) and title transfer fees are due when registering the title at the NJ Motor Vehicles Commission.
This story was written by NJ Personal Finance, a partner of NJ.com. The information presented here is created independently from the NJ.com editorial staff, and purchases made through links in this article may result in NJ.com earning a commission.
