Tax-Friendly Places to Buy a Car
Auto owners in Oregon live in the least-taxing state, while car buyers in Nevada aren't so lucky.
For most people, vehicle fees and taxes aren't such a big deal. You buy a new car and the sales tax and title and registration fees are automatically added to the balance of your auto loan. Then you pay for new tags once a year until it's time to get rid of the car.
But you might get a little agitated if you live in a state that levies a vehicle tax year after year. So we decided to see what vehicle owners pay in all 50 states and the District of Columbia. We asked Vincentric, a Bloomfield Hills, Mich., automotive research firm, to add up taxes and fees over five years for three 2006 vehicles: a $20,000 Toyota Camry LE, a $26,000 Ford F-150 XLT pickup truck and a $113,000 Audi A8 L super-luxury car.
What we found were surprising disparities from state to state in the amount of fees and taxes people must pay. For the 2006 Toyota Camry, for example, you would pay just $220 in fees and taxes over a five-year-period in Oregon. But if you live in Nevada, you would have to fork over $2,507.
Most states charge a sales tax in year one plus title and registration charges and, if applicable, plate fees, lien fees and emission fees. Then they levy a registration fee each year. When total fees in years two through five are higher than the registration fee, it's usually because you pay an excise or property tax each year. Every state has a different methodology, often based on a declining percentage of the original value of the vehicle or on a fixed percentage of a depreciating value.
Not included in the database are local taxes or fees. In Colorado, for example, regions, counties and towns levy their own taxes. Say you live in Boulder and own the Toyota Camry. In year one, you'll pay a 1.2% regional tax, a county tax of 0.65% and a city tax of 3.41% -- for an additional $1,072.
We made an exception to the no-local-taxes rule for two states: New Hampshire and South Carolina. At first blush, New Hampshire looks like the most-tax-friendly place in the U.S. to buy a vehicle. In fact, it is one of the least tax-friendly states (five-year total: $2,045) because fees assessed statewide by towns add several hundred dollars each year to what you pay. Similarly, in South Carolina ($1,633), a personal property tax collected by local jurisdictions adds up.
Which state has the lowest taxes and fees? Oregon, where residents are free of sales tax. Car owners pay registration and title fees in year one of $112, then $54 every two years after that. Five year total: $220.
Alaska also skips sales taxes. Fees there are $315 for the Camry, not including local taxes.
Alabama ($508), Delaware ($695) and even Virginia ($725), where the car tax has been a political hot potato, are kind to car owners because the sales tax rate is 3% or less and subsequent yearly fees are kept low.
North Carolina ($748), South Dakota ($793), Wyoming ($841), New Mexico ($851) and Louisiana ($870) round out the top ten most tax-friendly places to buy a car. Take a look at our slideshow of the top ten most friendly places to buy a car.
A couple of surprises: New York ($891) is only the 12th most expensive state, and "Taxachusetts" ($1,104) is only 17th most expensive.
Assessing the damage
Get a glimpse on our slideshow of the ten most taxing states to own an automobile.
The most expensive state to own a typical car, in terms of taxes and fees, is Nevada, where you'll pay $2,507 over five years for a Toyota Camry LE.
With a sales tax of 6.5%, its one-year charge of $1,576 is also worst in the nation. Nevada's charge includes a "government services tax" of 1.4% of the depreciated value of the vehicle, which boosts the total taxes and fees for the Camry to $275 in year two, $247 in year three and so on.
For multiple-car owners in Nevada, taxes and fees really add up. A Ford F-150 XLT pickup truck will set you back $3,575 over five years. If you keep a 12-cylinder Audi A8 L Quattro in your garage, you'll pay $15,509 over five years.
Part of that burden is due to a one-time federal "gas guzzler" tax of $1,700. The gas guzzler tax kicks in on a sliding scale for cars (but not trucks) that get less than 22.5 mpg in combined city and highway driving. The Audi gets an SUV-rivaling 17 mpg.
Another high-tax state is Indiana, which at $2,504 claims the second most expensive fees and taxes in the nation for a typical sedan. For pickup truck owners, it's the most expensive state. New Ford F-150 drivers will pay $3,761 over five years to the state coffers.
As you might guess, California ($2,212) shows up on the highest-tax list. Also among the ten most taxed are Arizona ($2,378), New Hampshire ($2,045), Iowa ($2,043), Minnesota ($1,931), Utah ($1,889), Colorado ($1,790) and Washington, D.C. ($1,651).