Although it’s not always a strict requirement, you may need to pay for tax, title, and license (TTL) fees out of pocket depending on your credit situation and where you get financed.
Tax, Title, and License Fees
A lot goes into taking out a car loan, and by law, you’re required to have a vehicle registered within your state. You must have a current registered license plate, and a title in the name of the legal owner. Typically, a registration fee is paid annually when you renew your license plates for another year. If you have an unregistered vehicle, you could be faced with a hefty fine.
It’s difficult to gauge how much you’ll pay, or even the average cost of tax, title, and license fees. These are calculated based on TTL options and dealer fees by your state as well as, typically, the vehicle’s cost. The sales tax rate and the costs to title, register, and license the car vary widely from state to state. The structure of registration fees also depends on the state you live in. Some use flat rates, while others base it on the vehicle's weight, value, age, or any combination of the three.
Paying for Your TTL Fees
There are two options for paying TTL fees: you can roll them into the loan and increase the amount, or you can pay for them out of pocket. If you have good to excellent credit, you can typically choose to either finance TTL fees or pay them upfront. Because you have good credit, most lenders won’t have an issue with you rolling TTL fees into your auto loan. The downside is that you’ll be paying interest charges on any fees you roll into the loan, and that’s where the option to pay out of pocket makes more sense (unless the loan has a zero percent interest rate).
On the other hand, if you have poor credit, you won’t have much of a choice on how you want to handle TTL fees. Increasing the loan amount by rolling in TTL fees is something that not all lenders are willing to do. And if a lender does allow you to add them, you won’t benefit at all from making your loan bigger – in fact, you’ll be paying a higher interest rate to finance these fees, while also increasing the monthly payment and interest charges on your loan. It’s best to pay as much upfront as possible for your car, at least enough to cover TTL fees. When you do, you kill two birds with one stone: you save money and increase your chances of approval.
When you buy your car at a dealership, the dealer does all the paperwork and registers your car with the DMV for you and charges a documentation fee – an extra fee not required by the state – to do this. When you buy your car from a private party, you need to complete the paperwork yourself and register the vehicle with DMV, although this means you can avoid paying the dealer’s documentation fee.
The Bottom Line
Your credit score is a big influence on whether or not you’ll be paying TTL fees out of pocket or not. Credit is king, and good credit will get you better rates and the ability to roll those fees into the loan. But, not everyone has perfect credit, and these buyers may find they need a car and worry about being turned down.
With a better understanding of how tax, title, and license fees work, you’re ready to move forward in the car buying process. Let The Car Connection lead the way. With our simple auto loan request form, and our nationwide network of dealerships, we want to connect you to a local dealer that can help you get the financing you need. Start today!