Arkansas is known for its natural beauty and being home to the headquarters of the world’s largest retailer.  Given where the state ranks on average income (closer to the bottom than the top) and average tax rate (closer to the top than the bottom), it means that these aren’t just taxes that apply to “people who will never notice it”.  So when it comes to buying and leasing a car in Arkansas there are definitely some important things to know to make sure you get into a vehicle that is truly affordable after all the taxes and fees are added in.

  • First and foremost, our research on sales tax on a lease in Arkansas has been inconclusive – there are conflicting reports that Arkansas is one of a handful of states that charge sales tax on the total vehicle selling price (the cap cost before some tax-exempt fees like title & registration), but other sources do not indicate this.  It is clear that there was a special tax on vehicle leases that expired in 2015, and that may be part of the confusion in finding clear and timely information. This is obviously a very significant item to ask about (including your dealer, and potentially other local resources such as the DMV) to confirm since applying the state sales tax (and any local sales tax surcharge) to the full purchase price could be a difference of over a thousand dollars on some cars.
  • The value of your trade-in vehicle will be deducted from the price of the purchase vehicle when calculating the sales tax, saving you money if you trade-in a vehicle when completing your purchase or lease.
  • The sales tax is determined before any manufacturer rebates are applied.  Therefore, if the negotiated price before the rebate was $21,000 and then there’s a $1,000 rebate you will still pay tax on $21,000, not the $20,000.  Another way to look at this is that Arkansas considers the rebate as a form of payment – the dealer sold the car for the full price, and gets the rebate amount from the manufacturer and the balance from you (and your lender/lessor if you finance or lease).
  • The average dealer documentation fee in Arkansas is about $100, and is capped at $129.  Also, the dealer is more likely to call this a “service and handling fee”, or something similar that doesn’t include the words “documents” or “documentation” because that may be confused with providing legal services.

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