What is the car tax in New Jersey?

In New Jersey, most car purchases and leases are subject to a 6.625% state sales tax, but battery-electric and hydrogen fuel-cell vehicles are exempt from that sales tax. The state does not levy an annual personal property tax on privately owned passenger cars. Additional costs you may encounter include registration/title fees, an annual road-use fee for zero-emission vehicles, and New Jersey’s per-gallon motor fuels tax built into gasoline and diesel prices.

How New Jersey taxes vehicle purchases and leases

New Jersey’s statewide sales tax rate of 6.625% applies to most new and used vehicle purchases and lease payments, regardless of where in the state the vehicle is bought or registered. A key exception is that zero-emission vehicles (ZEVs)—primarily battery-electric cars and hydrogen fuel-cell vehicles—are exempt from the state sales and use tax under N.J.S.A. 54:32B-8.55. If you buy out-of-state and title/register the car in New Jersey, you generally owe New Jersey use tax at 6.625%, with a credit for legally imposed sales tax paid to another state.

What gets taxed—and what doesn’t—on a typical deal

The following points outline how the taxable amount is usually calculated and which common items are exempt or included under New Jersey rules.

• Tax rate: 6.625% statewide; no additional local sales tax on vehicles.
• ZEV exemption: Battery-electric and hydrogen fuel-cell vehicles are exempt from sales/use tax. Plug-in hybrids and conventional hybrids are taxable.
• Trade-in credit: If you trade in a vehicle to the dealer, the trade-in value generally reduces the taxable price (tax applies to the net price after the trade-in allowance).
• Out-of-state purchases: If you title/register the vehicle in New Jersey, you owe NJ use tax at 6.625%, minus a credit for sales tax paid to another state (you pay the difference if that state’s rate is lower).
• Leases: Sales tax is typically collected on each monthly payment at 6.625% (dealers or lessors may handle collection timing; check your lease contract).
• Urban Enterprise Zones: Reduced UEZ sales tax rates do not apply to titled motor vehicles; the standard 6.625% rate governs unless the ZEV exemption applies.
• Fees: Government-imposed title, registration, and lien fees are generally not subject to sales tax. Dealer discounts usually reduce the taxable price; treatment of manufacturer rebates can vary by structure and timing—confirm how your dealer will calculate tax on your specific deal.

Taken together, most buyers will either pay 6.625% sales tax on the taxable transaction amount or, if purchasing a qualifying zero-emission vehicle, no sales tax at all. Always review your buyer’s order to see exactly what the dealer included in the taxable base.

No annual personal property tax on cars

Unlike some states, New Jersey does not charge local or statewide annual personal property tax on privately owned passenger vehicles. Owners still pay registration and title fees and, if applicable, inspection-related charges, but there is no recurring property tax bill tied to a car’s value.

Road-use and fuel taxes that affect drivers

Beyond the point-of-sale tax, New Jersey funds roads through fuel taxes and, for zero-emission vehicles, a separate annual fee. These are not sales taxes on the vehicle itself but are costs many drivers will encounter over time.

Zero-emission vehicle annual fee

As of July 1, 2024, New Jersey assesses an annual road-use fee on zero-emission vehicles (primarily battery-electric and hydrogen fuel-cell), collected at registration/renewal. For the current fiscal year, the fee is $250 and is scheduled by statute to increase modestly in subsequent years through FY2028. Plug-in hybrids are not treated as zero-emission for this fee.

Motor fuels tax

New Jersey’s motor fuels tax is embedded in pump prices and adjusted each year on October 1 by the State Treasurer. For the current period (October 1, 2024–September 30, 2025), the rates are 42.3 cents per gallon for gasoline and 49.3 cents per gallon for diesel. These rates can change annually to meet Transportation Trust Fund targets.

Real-world examples

The scenarios below illustrate how New Jersey’s car tax rules typically apply. Actual dealer paperwork may vary; use these as guides and confirm figures on your contract.

1. Used gasoline car, purchase: Price $20,000; trade-in $5,000; taxable amount $15,000; sales tax = $993.75 (6.625% of $15,000), plus title/registration fees.
2. New battery-electric car, purchase: Price $35,000; ZEV exemption applies; sales tax = $0; you still pay title/registration and, at renewal, the ZEV annual fee ($250 this year).
3. Out-of-state purchase, titled in NJ: You paid 4.0% sales tax in State A on a $25,000 car. New Jersey use tax is 6.625% minus credit for 4.0%, so you owe the 2.625% difference to NJ at titling (=$656.25), assuming no trade-in.
4. Lease of a hybrid (not ZEV): Monthly payment $400; sales tax of 6.625% is generally applied to each payment (= $26.50 per month), subject to lease terms and how the lessor collects tax.

These examples show how the rate, exemptions, and credits interact—especially the ZEV exemption, trade-in reductions, and cross-state credits for use tax.

Common questions and clarifications

Drivers often ask about eligibility and locality rules. The points below address frequent misconceptions.

• Does county or city affect the rate? No. Vehicles are taxed at the statewide rate (6.625%), with the ZEV exemption the main exception.
• Are conventional hybrids or plug-in hybrids tax-exempt? No. Only zero-emission vehicles qualify for the sales/use tax exemption.
• Do I pay sales tax if I buy from a private seller? Yes, you owe 6.625% use tax when you title/register the vehicle in New Jersey (ZEVs remain exempt).
• Do trade-ins always reduce the taxable price? Trade-ins to the dealer typically reduce the taxable amount; private-party sales and separate sell-then-buy transactions generally do not.
• Are title and registration fees taxed? Government fees are generally not subject to sales tax; review your bill of sale to see what’s included in the taxable base.

If your situation is atypical—such as business use, fleet purchases, or complex rebate structures—consult the dealer and the NJ Division of Taxation for precise calculations.

Bottom line

For most buyers, New Jersey’s “car tax” is the 6.625% state sales tax on vehicle purchases and leases. Zero-emission vehicles are exempt from this tax, and the state does not impose an annual personal property tax on cars. Expect additional, non-sales-tax costs like registration/title fees, the ZEV annual road-use fee (for EVs), and fuel taxes embedded in gas and diesel prices.

Summary

New Jersey taxes most car purchases and leases at 6.625%, exempts battery-electric and fuel-cell vehicles from that sales/use tax, and does not charge an annual property tax on cars. If you buy out of state, you’ll generally owe New Jersey use tax at 6.625% minus credit for tax paid elsewhere. EVs pay a separate annual road-use fee (currently $250), and all drivers pay fuel taxes embedded in pump prices (currently 42.3¢/gal gasoline, 49.3¢/gal diesel).