What is the tax on a new car in Texas?

Texas charges a 6.25% state motor vehicle sales tax on the purchase price of a new car, calculated after any trade-in credit and before any manufacturer rebates, with no additional city or county sales tax on the vehicle. In addition to this tax, buyers pay standard title and registration fees that are not part of the sales tax.

How Texas calculates motor vehicle sales tax

Under Texas law, motor vehicle sales tax is assessed at a flat 6.25% on the “total consideration” you pay for the vehicle. The taxable amount is reduced by the value of a trade-in but is not reduced by manufacturer rebates. Dealer discounts lower the taxable price, while government fees like title and registration are not part of the taxable base. The Texas Comptroller of Public Accounts administers this tax, and no local sales tax applies to motor vehicle purchases.

What counts toward (and against) the taxable price

The following points outline which items are included in the taxable amount and which are excluded when you buy a new car in Texas.

• Included in tax calculation: the negotiated vehicle price after dealer discounts, destination/delivery charges, dealer-installed accessories, and dealer documentation fees.
• Reduces tax: the value of a vehicle you trade in to the dealer (trade-in credit is subtracted from the price before the 6.25% is applied).
• Does not reduce tax: manufacturer rebates and incentives (tax is calculated before subtracting a factory rebate).
• Excluded from motor vehicle sales tax: state title and registration fees, county fees, and state inspection/emissions-related fees. Products like service contracts or GAP may be taxed separately under different rules, but they are not part of the motor vehicle sales tax base.
• No local add-on: cities and counties do not impose additional sales tax on motor vehicle purchases in Texas.

The practical takeaway: your trade-in lowers the taxable amount, dealer discounts lower the price before tax, but manufacturer rebates do not reduce the amount on which the 6.25% tax is computed.

Example calculations

These scenarios show how the 6.25% motor vehicle sales tax typically works when buying a new car in Texas.

1. New car priced at $40,000, no trade-in or rebate: Taxable amount = $40,000; Tax = $2,500.
2. New car priced at $35,000, $5,000 trade-in, $1,500 manufacturer rebate: Taxable amount = $35,000 − $5,000 = $30,000 (rebate does not reduce tax); Tax = $1,875.
3. New car with $1,000 dealer discount and $995 doc fee: Taxable amount = (Price − $1,000 + $995 doc fee) minus any trade-in; apply 6.25% to that result.

In every case, remember the 6.25% applies to the vehicle transaction itself, and other government fees are added separately at closing.

Special situations that can affect what you owe

While a straightforward new-car purchase from a Texas dealer is taxed at 6.25%, a few situations change how and when you pay.

• Leases: Texas typically taxes the full selling price of the vehicle upfront at 6.25%, collected by the lessor. Some leases use “tax credits” that can reduce the tax passed to the customer.
• Out-of-state purchases: If you buy a new car elsewhere and bring it into Texas, you owe Texas motor vehicle use tax at 6.25%, with credit generally allowed for legally imposed sales/use tax paid to another state (you pay the difference up to 6.25% if the other state’s tax was lower).
• New residents: If you move to Texas with a vehicle you already own, a one-time $90 new resident tax generally applies instead of the 6.25% sales/use tax, provided the vehicle was previously titled/registered in your former state.

These provisions ensure Texas collects its motor vehicle tax fairly while avoiding double taxation when you’ve already paid another state.

What you’ll pay besides the tax

The sales tax is only part of your drive-off cost. Buyers also pay standard state and local fees that vary slightly by county and vehicle type and are not themselves subject to local sales tax on motor vehicles.

• Title application fee: typically $33 statewide.
• Registration base fee: typically $50.75 for most passenger vehicles up to 6,000 lbs, plus county/local add-ons that commonly range roughly $10–$50.
• Inspection program replacement fee: $7.50 annually as of January 1, 2025, replacing the annual safety inspection for most passenger vehicles; emissions testing fees may still apply in designated counties.
• Dealer charges: documentation fees are generally included in the taxable amount; dealer “vehicle inventory tax” is a separate pass-through of property tax and is not itself a sales tax.

While these amounts are separate from the 6.25% sales tax, they are part of your total out-the-door price and should be included in your budgeting.

How to estimate your total at the dealership

A quick approach can help you forecast the tax portion of your purchase and avoid surprises at signing.

1. Start with the negotiated vehicle price after any dealer discounts.
2. Subtract your trade-in value (if any).
3. Add dealer-installed accessories and doc fees.
4. Ignore manufacturer rebates for tax purposes (they don’t reduce the taxable amount).
5. Multiply the result by 6.25% to get the sales tax.
6. Add title, registration, county fees, and any applicable inspection/emissions charges to estimate your total due.

This method mirrors how Texas dealers and county tax offices compute what you owe and will get you close to the final figure.

Summary

Texas imposes a 6.25% state motor vehicle sales tax on new cars, applied to the purchase price after any trade-in credit and before manufacturer rebates, with no additional local sales tax. Expect to pay separate title, registration, and inspection-related fees. For leases, out-of-state purchases, and new residents, Texas has specific rules, but the cornerstone remains the 6.25% statewide rate administered by the Texas Comptroller.

How to avoid car sales tax in Texas?

A motor vehicle purchased in Texas for use exclusively outside Texas is exempt from motor vehicle sales tax. To claim the exemption, a purchaser must not use the motor vehicle in Texas, except for transportation directly out of state, and must not register the motor vehicle in Texas.

How do you calculate sales tax on a car in Texas?

Sales: 6.25 percent of sales price, minus any trade-in allowance.

What fees come with buying a car in Texas?

In Texas, you’ll need to pay for sales tax (which is around 6.25%), title and registration fees, and dealer fees. Ensure these are included in the contract.

What is the tax rate for buying a new car in Texas?

A motor vehicle sale includes installment and credit sales and exchanges for property, services or money. A transfer of a motor vehicle without payment of consideration, that does not qualify as a gift, is a retail sale and is subject to the 6.25 percent motor vehicle tax.