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NJ Car Sales Tax: Know How Much to Pay

  • Auto Insurance
  • Gerard Stevens
  • 5 minutes

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Are you planning to buy a car in New Jersey? But you must pay taxes and fees when you buy, title, and register a car in the state. Whether you buy your car in the state or out of state, you must pay the NJ car sales tax. But most importantly, how much is the New Jersey car sales tax?  

The statewide tax remains the same. But the actual tax rate you pay depends on your county and local taxes. So there is no way that you can evade paying NJ car sales tax unless you qualify for some exemptions. Read our article to know more about sales tax on cars in New Jersey. 

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How much is the car sales tax in NJ?  

Whether purchasing a new or a secondhand car, the tax rate you must pay is 6.625%. In addition to this base rate, you must also pay the county and local tax rates. Cumberland County has the highest rates in the state, with a combined sales tax rate of 8.625%. The combined tax rate in every other county in the state is 6.625%. 

How to calculate sales tax in New Jersey on cars 

Do the following to find the actual rate you pay.  

  • Add any applicable city, county, and special district tax rates to the statewide tax rate of 6.625%. 
  • To calculate the total tax due for your car purchase, multiply the percentage by the car’s buying price.  

Does trading in a car reduce sales tax in New Jersey?  

Yes. Many dealerships will trade in your current car in exchange for a credit toward the buying price of your new car. For instance, you may trade in your old car and get a $5,000 credit toward the purchase price of a new car worth $25,000, paying $20,000 only from your wallet. The state doesn’t tax the value of the trade-in. So, the taxable cost of your new car will be $20,000, implying you’ll save the taxes you’d have paid on the $5,000 trade-in value.  

How are rebates and incentives taxed?   

Some dealerships offer incentives and discounts on your car’s buying price. For instance, they may offer a $1,000 rebate on a car priced at $25,000. So, your out-of-pocket expense will be $24,000. The NJ sales tax for cars gets charged before applying any rebates or incentives to the car’s buying price. Thus, you’ll pay the tax if the car costs $25,000. 

Is car sales tax deductible in NJ? 

Yes. NJ car sales tax is deductible on your federal tax return. You can claim state/local sales taxes or state/local income taxes. The income tax deduction is often more advantageous in states with a state income tax. 

How much is the sales tax on a used car in NJ? 

You must pay the statewide tax rate of 6.625% when buying a secondhand car in the state. 

Do you pay sales tax on a leased car in NJ? 


Yes. A sales tax on a leased car exists unless a valid exemption applies. The person who leases a car from a dealership must pay the tax. The dealership is responsible for collecting and paying the tax to the state.  

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Who pays sales tax when selling a car privately in NJ? 

When you purchase a car via a private seller, you needn’t pay taxes to them. Instead, when you take the title to the NJ Motor Vehicle Commission to transfer and register your car, you must pay the applicable state tax rate.  

What other fees must you pay while buying a car in New Jersey?  

In addition to the sales tax fee, you must pay the following fees when buying a car in the state.  

Category  Fee 
Title  $60-$85 
Registration  $35 
Plate transfer  $4.50 
Documentation   $335 

The documentation fee covers the cost of creating and filing the sales tax forms, sales contracts, etc. Since dealerships fix the documentation fee rather than the government, they might vary from one dealership to another or between car models.  

Do you have to pay sales tax on a gifted car in NJ? 

No. However, a sales tax-satisfied stamp with the correct exemption number is required. If you gift the car to a relative, the sales price must be marked GIFT. 

Does NJ charge sales tax on electric cars? 

No. Electric cars are exempt from New Jersey car sales tax. It applies to selling, renting, or leasing a new or secondhand electric car.  Plug-in hybrid electric cars don’t get this exemption, though.  

How do I avoid paying sales tax on a car in NJ? 

You’ll be exempt from car sales tax in New Jersey if you fulfill the following conditions.  

  • A government agency is using the car. 
  • The vehicle is used exclusively for farming tasks.   
  • You’re using an electric vehicle.  
  • The car was received as a gift or by an heir or beneficiary. 

If you qualify for a tax exemption, you must visit the Motor Vehicle Agency in person.  

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