Sales tax on a car in Alabama: the 2% automotive rate
Alabama taxes cars at a reduced state rate of 2%, compared with 4% for most other goods, plus local city and county taxes.[1] When a used vehicle is taken in trade, the tax is levied on the net difference; a trade worth more than the new car cannot create a deduction.[1]
| Case | Tax | Share of price |
|---|---|---|
| $30,000 car, $8,000 trade, $499 fee, $2,000 rebate, 3% local | $1,124.95 | 3.75% |
| Revenue guide example: $50,000 + $500 fee, $5,000 rebate, state only | $1,010.00 | 2.02% |
| $15,000 used car, private sale, 4% local | $900.00 | 6.00% |
| $45,000 truck, $20,000 trade, 2.5% local | $1,125.00 | 2.50% |
Rebates and dealer fees are taxed
Manufacturer rebates of any type are taxable when applied to the price. The Department of Revenue's example: a $50,000 vehicle with a $500 dealer fee and a $5,000 rebate assigned to the customer costs the buyer $45,500, but the taxable amount is $50,500, so the 2% state tax is $1,010.[1]
Local tax: dealer location or your home
- Dealer sales: the dealer collects the city and county tax where the dealership is, and only one city and one county tax applies whatever the rate.[1]
- Private (casual) sales: you pay state and local use tax when you register the car in the county where you live.[1]
- Bought out of state: Alabama credits taxes legally paid to another state.[1]
Why Alabama looks cheapThe 2% state rate is one of the lowest on vehicles, but local automotive rates differ a lot between cities, so the total depends on where you buy or live.
Compare states on the car sales tax calculator, include the tax in a budget with the car affordability calculator, or see the yearly total on the cost of owning a car calculator.
Frequently asked questions
What is the sales tax on a car in Alabama?
2% state automotive rate plus city and county tax, on the price after trade-in.
Does Alabama tax manufacturer rebates on cars?
Yes. Rebates are part of the taxable price.
How is sales tax paid on a private car sale in Alabama?
The buyer pays state and local use tax when registering the car in their home county.