Can You Finance Sales Tax on a Car in Missouri?
Learn how Missouri car buyers can include sales tax in their auto loan, how it affects monthly payments, and the steps required for registration.
Buying a car in Missouri comes with costs beyond the sticker price, including sales tax. Covering this expense upfront can be difficult, leading many buyers to wonder if it can be included in a vehicle loan.
Understanding how sales tax financing works and its impact on the total loan amount is essential before making a decision.
Lender Policies for Including Sales Tax
Auto lenders in Missouri generally allow sales tax to be rolled into a vehicle loan, but approval depends on the lender’s policies and the borrower’s financial profile. Banks, credit unions, and dealership financing arms have different guidelines on how much can be financed beyond the car’s purchase price. Some lenders set a cap on the loan-to-value (LTV) ratio, which compares the loan amount to the car’s market value. If the total loan, including sales tax, exceeds this ratio—often between 100% and 120%—the lender may require a larger down payment or deny the request.
Creditworthiness plays a role in whether sales tax can be financed. Borrowers with higher credit scores and stable incomes are more likely to receive approval for a loan that includes additional costs like taxes and fees. Lenders assess debt-to-income (DTI) ratios to ensure the borrower can handle the increased loan balance. A DTI above 40% may lead to stricter financing terms or a requirement to pay sales tax separately.
Dealership financing is often the most flexible option for including sales tax in a loan. Many dealerships work with lenders that offer full financing, covering not just the vehicle price but also taxes, registration fees, and optional add-ons. Independent banks and credit unions may have stricter policies, requiring borrowers to pay taxes out of pocket or limiting the amount that can be added to the loan.
How to Add Sales Tax to a Vehicle Loan
Incorporating sales tax into a vehicle loan requires coordination between the buyer, lender, and dealership. The process begins with determining the exact tax amount owed, based on the vehicle’s purchase price and applicable state and local tax rates. Missouri’s state sales tax on vehicle purchases is 4.225%, but additional local taxes can increase the total. Buyers can check the Missouri Department of Revenue’s tax calculator to estimate their final tax obligation.
Once the tax amount is known, buyers must confirm with their lender that it can be included in the loan. This typically involves adjusting the loan request to reflect the total amount needed, including the vehicle price and tax. Dealerships often handle this step by structuring the loan paperwork accordingly. Buyers using an external lender, such as a bank or credit union, may need to provide documentation showing the total cost breakdown, including taxes, to secure approval.
Loan agreements must specify that sales tax is being financed to avoid confusion during registration. Missouri requires vehicle sales tax to be paid to the Department of Revenue within 30 days of purchase to avoid penalties. When the tax is included in the loan, the dealership or lender often handles the payment directly. Buyers should verify this arrangement to prevent unexpected out-of-pocket expenses after the sale.
Impact on Payment Amount
Rolling sales tax into a car loan increases the total amount borrowed, affecting monthly payments and interest costs. A higher loan balance means higher principal and interest payments over time. For example, if a buyer finances a $25,000 car and adds $2,000 in sales tax, the loan amount rises to $27,000. With a 6% interest rate on a 60-month term, the monthly payment increases by roughly $39 compared to financing only the vehicle price.
Financing sales tax also raises the total interest paid over the life of the loan. Since interest accrues on the entire loan balance, buyers end up paying more in financing costs than if they had paid the tax upfront. Using the previous example, the total interest paid over five years would be about $4,332 on a $27,000 loan, compared to $4,018 on a $25,000 loan—an additional cost of $314.
Extending the loan term to offset the payment increase can reduce monthly costs but leads to greater interest expenses overall. A 72-month loan instead of a 60-month term lowers the monthly payment but increases the total interest paid due to the longer repayment period. Borrowers should weigh whether the short-term relief of a lower payment is worth the added long-term cost.
Registration Steps After Financing
After financing is secured and the vehicle is purchased, Missouri law requires buyers to complete registration before operating the car. Title and registration applications must be submitted to the Missouri Department of Revenue within 30 days of purchase to avoid penalties. Buyers should gather necessary documents, including the Manufacturer’s Statement of Origin (for new vehicles) or the properly assigned title (for used vehicles), a notarized lien release if applicable, and proof of a valid Missouri auto insurance policy meeting the state’s minimum liability coverage requirements.
The registration process may also involve vehicle inspections. Missouri mandates safety inspections for most vehicles over 10 years old or with more than 150,000 miles if being registered in certain counties. Additionally, emissions testing is required in the St. Louis metropolitan area. Buyers should check local Department of Revenue requirements to determine whether their vehicle needs testing before registration. Failing to complete required inspections can delay processing and result in additional fees.