Iowa gains national attention every four years because it’s traditionally one of the early states involved in the presidential nominee selection process, and is the first state to host it caucus each cycle.  But, there are things going on there in the other 47 months out of a 4-year cycle too, and among other things the state is clearly changing over time from being dominated by agriculture to it being one of many well-represented industries in a more balanced economy.  Overall, the laws specific to auto leasing and buying appear to be generally consumer friendly, reasonable, and also offer reasonable protections to consumers on items that other states may not offer.

Some key things to know if you’re buying, leasing, or selling an automobile in Iowa:

  • Vehicle sales are exempt from the standard sales tax in Iowa.  However, there is a One-Time Registration Fee, which is 5% of the selling price that is imposed instead.  This is good news though: the state-wide sales tax rate in Iowa is 6%, with some municipalities charging a surtax on top of this base rate.  This One-Time Registration Fee is imposed whether the vehicle is purchased or leased.  It does mean that in Iowa the lessee effectively pays the tax upfront instead of as they go along as is commonly the case.  There’s a worksheet here that shows how this is calculated.
  • A trade-in vehicle’s value reduces the purchase price that is subject to the One-Time Registration Fee.  For example, if the price of the new car is $20,000 but the trade-in is worth $10,000 then the One-Time Registration Fee is only imposed on the difference of $10,000.  Note – if you’ve looked at the leasing worksheet that was linked above, you’ll notice that its not clear how you get credit for a trade-in vehicle to reduce the One-Time Registration Fee due if you choose to lease.  Be sure to ask your dealer, or the Iowa Department of Revenue, about how credit for your trade-in value is provided.
  • Note that the “One-Time Registration Fee” is in lieu of more traditional sales tax, but is distinct from the more traditional registration fee, which is also imposed at the time of the vehicle purchase/lease, and then would be subject to renewal over time as well.
  • Manufacturer rebates are also treated as a price discount – meaning that they reduce the price on which the One-Time Registration Fee is imposed, so that you won’t pay the fee on this amount.  From reviewing the lease worksheet, it is clear this discount is applicable to both vehicles that are purchased leased.
  • The maximum documentary fee (“dealer doc fee”) that can be charged is $180, and that is likely on the way down based on proposed legislative action in late 2017 that will reduce the max by $25 to $155.  Additionally, if the dealer is charging a documentary fee it must be disclosed along with the price in all advertisements.  The amount of the fee is not subject to the 5% One-Time Registration Fee.