The real cost of buying a car is much higher than you would expect. Wisconsin's sales tax on cars, for example, is 5 percent, according to the State Department of Revenue. That's lower than the national average, but you must also pay registration fees, wheel tax, local sales tax and more. Remember to factor in the cost of auto insurance, fuel and repairs too.
Consider Also: How to Figure Sales Tax on Vehicles
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Wisconsin Sales Tax on Cars
Buying a car for yourself or your loved ones is a major financial decision. The average cost of a new vehicle is around $40,000, but you'll also be responsible for maintenance and repairs. Don't forget about state and local taxes, insurance premiums, vehicle licensing costs and other expenses. What you'll pay depends on the local regulations, type of car and whether you buy or lease the vehicle.
Wisconsin residents must pay a 5 percent sales tax on car purchases, plus county taxes of up to 0.5 percent. Some counties also charge a stadium tax of 0.1 percent, notes the Wisconsin Department of Revenue. For example, the state and local sales tax on vehicles registered in Bayfield County is 5.5 percent. The national average state and local sales tax, by comparison, is 7.12 percent, according to AARP. California, Alabama, Arizona, Illinois, Louisiana and other states charge up to 9.52 percent in sales tax.
As far as trade-ins go, you will only pay sales tax on the difference between the full purchase price and the credit received from dealerships, notes the Wisconsin Department of Revenue. If, say, you buy a $40,000 SUV and get a $3,000 credit for your old car, the taxable price of your new car will be $37,000. These regulations don't apply to rebates and incentives.
Sales Tax Exemptions
Some transactions are exempt from the payment of state or local sales tax, reports the Wisconsin Department of Transportation. If you inherit a car or receive one as a gift, then you don't have to pay sales tax. Likewise, individuals who transfer the car title to their spouses, children, parents or other family members are not required to pay this tax.
The exemption also applies to tribal members and new Wisconsin residents who purchased their cars outside the state. If the vehicle was won in a contest, the recipient does not owe sales tax. Wisconsin residents who trade in their homes or apartments for a personal car (with no money exchanged) are exempt from this tax too.
All applications are reviewed by the Wisconsin Department of Revenue, which can be contacted at (608) 266-2776. Fraudulent entries can result in heavy fines, so it's in your best interest to speak with a representative before submitting your application. Let him know about your current situation to see if you qualify for an exemption.
Consider Also: When Do You Pay Taxes When Buying a Vehicle out of State?
Other Fees and Taxes
Wisconsin's sales tax on cars may seem low compared to the national average, but there are several other fees and taxes you can expect to pay. These usually include vehicle registration fees, title fees, license plate fees and wheel tax. For example, some counties and municipalities may charge a so-called "wheel tax" that applies to most types of vehicles, from personal cars and mopeds to light- and medium-duty trucks. This fee ranges between $10 and $40 per year, according to the Wisconsin Department of Transportation.
The annual registration fee for standard cars is $85. If you also purchase a trailer, you'll pay an extra $50. Different rates apply to motorhomes, trucks and other types of vehicles, explains the Wisconsin Department of Transportation. Wisconsin residents must also pay a $164.50 title fee and miscellaneous fees, such as a $5 processing fee or a $3 temporary plate fee.
Note that some dealerships may charge documentation fees, advertising fees or dealer fees. Unfortunately, Wisconsin law does not regulate these practices, meaning that you could end up paying hundreds of extra dollars. Make sure you ask about these costs in advance. Otherwise, you may have to pay penalty fees for canceling the contract if you change your mind later on.
- Wisconsin Department of Revenue: Sales and Use Tax Information for Motor Vehicle Sales, Leases, and Repairs
- Consumer Reports: People Are Spending More on New Cars, but Prices Aren't Necessarily Rising
- Bayfield County: Vehicle Registration
- AARP: States With Highest and Lowest Sales Tax Rates
- Wisconsin Department of Transportation: eMV Public FAQs - Purchase Price Information
- Wisconsin Department of Transportation: Municipal or County Vehicle Registration Fee (Wheel Tax)
- Wisconsin Department of Transportation: Title/License Plate Application