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What Is Luxury Car Tax?

Vehicles that are classified as "luxury" are charged a different tax criteria than are cars that do not meet the requirement. A luxury car tax can raise the price paid for a car considerably.

  1. Which Cars

    • Luxury car tax applies to the newest cars where the price is more than the threshold set by Congress. As of 2010, the threshold is $57,180 in the United States.

    When it Applies

    • Luxury tax is payable as soon as the vehicle is purchased. If the vehicle is less than 2 years old, it may apply as well.

    Calculation

    • The luxury tax is typically quoted by the dealership from which the vehicle is purchased. It is the price of the car over the threshold set by Congress minus the Goods and Services tax multiplied by the LCT rate.

    Auto Coverage Warranties

    • Auto coverage warranties generally are not included in the purchase of a vehicle, and you need to insure the car against varies types of damage. The coverage depends on the warranty purchased.

    Assistance

    • Financial packages can help minimize total costs, and brokering services can attempt to find cheaper vehicles for you, but the tax is unavoidable.

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