Can You Finance Sales Tax When You Purchase a New Car?
In most cases, sales tax can be financed when purchasing a new car. This is helpful for customers who are looking to put nothing down when taking delivery of a vehicle.
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Significance
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As the Nevada Federal Credit Union states on its website, financing sales tax when purchasing a new car allows buyers to put little or no money down. This can be helpful if money you would otherwise use for a down payment is in certificates of deposit or other investments that are not immediately available.
Considerations
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If a no-interest loan is available, financing the sales tax is a smart idea. You can invest the sales tax money in moderate- or high-yield investments while paying no interest on your loan.
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Expert Insight
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Keeping your money in the bank and financing the sales tax is a good choice, as long as you can afford the higher monthly payments. Use a calculator like the one at bloomberg.com (see Resources below) to approximate the returns on investing your sales tax and interest savings.
Benefits
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Financing sales tax can help you get a new vehicle sooner, without having to save a large down payment.
Warning
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If you are financing negative equity or have a poor credit history, you may be unable to finance sales tax. One factor used to approve a loan is the "advance," or the proportion of the amount financed to the value of the collateral. As the University of Illinois Employees Credit Union states on its website, 125 percent of the MSRP of a vehicle is a common maximum amount to be financed. If the total amount financed. including sales tax, exceeds125 percent of the MSRP, money down must be used to move the amount financed within this range.
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References
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