All About Sales Tax
Sales Tax is another expenditure to be aware of when purchasing a vehicle. The State of Arkansas outlines it’s tax information below.
Sales tax, registration and title fees: The state sales and use tax rate is 6.5%, 7% for Texarkana residents, of the taxable price of motor vehicles, trailers and semi-trailers with a gross purchase price of $4000.00 or greater. Tax is computed on the total delivery price including rebate, freight charges and extra equipment. Federal Excise Tax is not included. Extended warranties are taxable whether or not the vehicle is taxable.
So the total purchase price, after trade-in (if applicable) is multiplied by 6.5%. Just like for a down payment, let’s use a vehicle cost of $12,000.
Without a trade in, your sales tax on a $12,000 vehicle would be $780.00. This does not cover any of the other local fees or taxes assessed when you get your plate.
Assistance with sales tax is an option offered by some lenders. Keep in mind that the total loan value is always considered. For example, if you’re approved for that same $12,000 vehicle, and you put $2400 down, then you may have some room to add that $780 to the back of the note. Here’s the math on that.
$12,000 – $2,400 = $9,600. $9,600+$780 = $10,380.
Keep in mind, you will also pay interest on that additional $780 you add to your loan. At a 7% interest rate, that would cost you an additional $54.00
Our objective anytime we finance someone on a vehicle is to get them the title to the vehicle as soon as we can, without causing too much of a financial burden. Owning your vehicle outright is a great way to a healthier financial outlook.