When you are buying a car, there is more than just the loan to consider. You need to remember that there are also tax, title and license fees, or TTL. So, you may be required to bring additional money to the table, depending on who you purchase the car from.
If you are purchasing a vehicle from a dealership, these fees can often be rolled into your auto loan, but if you are dealing with a private seller or getting your loan from the bank, you will need to pay these fees separately. With banks, there may be certain terms and conditions that will keep you from having the TTL fees rolled into the loan, whereas private sellers do not have the authority to collect these fees. In the last two cases you'll have to pay the tax, title and license fees when you visit the DMV to register the vehicle.
However, even with a dealer, you may still not be able to avoid an out of pocket cost.
The Loan to Value Ratio
How much you will pay really depends on your Loan to Value ratio, or LTV. This ratio is affected by your credit score. If your credit is great, let's say, 700, you should have no problem getting the TTL fees rolled into your payment. But if your credit is bad – around 500 - you will need to bring money to the table not only to cover the fees, but for a down payment as well.
Item 700 Credit Score 500 Credit Score
Sales Price $10,000
Plus Est. Tax, Title, & License Fees $750
Total Out the Door Price $10,750
Wholesale Value $9,000
Times Max LTV 1.45 1.05
Max Loan $13,050 $9,450
Cash Due at Signing 0 $1,300
In this equation, if the buyer has bad credit, the fees would not be covered and would need to pay $1300 out of pocket.
Of course, a trade in may help cover some or all of the TTL fees. If you have a vehicle to trade in, there may be enough equity in it to pay for all – or a portion - of the fees.
Interest Costs will Rise
Before you decide to roll these fees into your loan, consider this: do you really want to pay interest on these fees? Once they are rolled into the loan, you will be paying interest on those amounts as well. Depending on your interest rate, you may be better off just paying the fees upfront.
At this point you’re probably wondering: how much are the tax, title and registration fees? Well, the tax is based off of your state’s sales tax rate, and you can go to the National Conference of State Legislatures (NCSL) site to see title and license fees. But for the most up-to-date information, your best bet is to contact your nearest DMV office or Secretary of State.
When You Can't Wait
Here at Auto Credit Express, we want you to make the best decision for your situation. And the best way to do that is to have all of the information you need. If you need to buy that next automobile and can't wait until your credit has improved, we can help. Just fill out the free and fast online application today and we will find you the dealer that can get you into the car you need!