At first glance, Delaware appears to be a tax haven for used car buyers—the state does not have a general sales tax, leading many to believe that private party vehicle purchases are tax-free. But there's a catch.
While Delaware does not charge sales tax, the state charges a 4.25% "motor vehicle document fee" on most used vehicle purchases, including private party sales.
Do You Pay Taxes When You Buy a Car From a Private Seller in Delaware?
When you buy a car in Delaware, whether from a private party or a car dealer, you do not have to pay sales tax. Whereas other states rely on sales tax to fund infrastructure and programs, Delaware uses personal income tax and property tax to do so. As a result, Delaware residents pay some of the country's highest income and property taxes.
So while Delaware can technically boast of having "no sales tax," the DMV's mandatory document fee ensures vehicle purchasers pay a sales tax by another name.
Car Title, Registration and License Plates Fees in Delaware
In addition to the car's purchase price, you have to factor in the title transfer, registration, and new license plate fees for your used car.
Delaware Title Transfer Fees
In the state of Delaware, titling and registration are done at the same time. When purchasing a used car, you will need to provide your local Delaware DMV office with the following:
- Vehicle title certificate
- Vehicle bill of sale
- Fill out the certificate of title application (Form MV-212)
- Proof of valid Delaware insurance
- Odometer disclosure statement
- Emissions certificate
- Title fee: $35
See our guide to transferring a Delaware vehicle title for more information on the process.
Delaware Vehicle Registration
Registration in Delaware costs $40. To apply for a Delaware license plate, you must have a valid Delaware car registration card from the Delaware Division of Motor Vehicles. To register your vehicle, you will first need to transfer the title.
You will need to submit the following documents to your local DMV office:
- Proof of valid Delaware car insurance policy
- A valid Delaware driver’s license or two documents that prove your identity (identification card and passport)
- The vehicle’s signed-over title
- Payment for the registration fee: $40
Delaware License Plates Fee
The fee for passenger vehicle registration is $40 per year, which includes the cost of your standard license plate. A Delaware vanity plate is $40 in addition to the $40 registration fee, and you can only apply online through the Delaware DMV website.
In Delaware, vehicles are required to have only a rear license plate. Every state in the US requires a rear license plate. While some states require a rear plate only, other states require a front license plate in addition to the rear plate.
Delaware vs Other States
Consider yourself fortunate if you are purchasing a vehicle in Delaware: the state does not levy sales tax on used or new vehicle purchases. Be glad you don’t live in Kansas, where the sales tax rate on a car purchase is 7.5% (plus local taxes that vary depending on the county or city). California has the second-highest car sales tax after Kansas, with an average sales tax rate of 7.2%.
If you take a look at the states bordering Delaware, you’ll see that the sales tax on cars in Maryland is 6%, same as Pennsylvania. These states also impose local (city, county, or both) taxes, resulting in an even higher total sales tax on a motor vehicle.
Motor Vehicle Documentation Fee Exemptions
While the mandatory documentation fee paid to the DMV functions as a stealth sales tax for many buyers, some exemptions do apply:
- Immediate family members title transfers and gifts are exempt.
- Transfers between existing joint owners with no money exchanging hands are exempt.
- Name changes due to marriage, adoption, etc. are also exempt.
Aside from these exceptions, the document fee is applicable to all private party car transactions. Buyers pay the fee directly to the state upon registration, just like a sales tax.
Is Buying from a Car Dealer Better?
Many people believe that purchasing a car from a dealership is a great way to avoid hassle and save money. In fact, going to a dealer ends up costing you more money.
When you buy a car from a Delaware dealership, you pay all the same fees that you’d pay if you bought it from a private seller. Car dealerships have a way of rolling it all up in the fine print, but the charges are still there.
Additionally, dealerships charge a "documentation fee" in addition to all other taxes and fees. The state document fee is 4.25% of the purchase price or NADA book value, whichever is greater.
Perhaps more significantly, nine times out of ten, you’ll pay more for a used vehicle when you buy it from a dealer compared to buying the same vehicle from a private seller. Dealers are notorious for buying low and selling high to make a profit. Cut out the middleman and get the best price possible by transacting peer-to-peer on PrivateAuto.
Dealers bring convenience that private sellers typically don’t, but that is where PrivateAuto comes in. Our platform offers the same dealer-like experience while allowing you to buy or sell from regular people without paying hefty fees—unlike our competitors. Get lower prices when you shop used cars from private sellers right here on PrivateAuto.
Sell and Buy Used Vehicles on PrivateAuto
PrivateAuto makes private car transactions simple and secure. Our transactional marketplace gives buyers and sellers all the tools to complete the deal, from in-app financing to secure messaging to integrated payments.
We allow you to negotiate the best price, schedule test drive meetups, and pay for the car all from the comfort of your own home, all without disclosing any personal information.
If you're looking to buy a car, browse our selection of used cars for sale.
Here’s how you can sell your car in Delaware with a few simple steps:
- Gather necessary paperwork
- Register on PrivateAuto and get verified
- List your car
- Set your terms
- Vet incoming offers
- Choose a buyer
- Schedule a meeting
- E-sign documents
- Get paid, instantly
- Transfer the title
Delaware Sales Tax FAQ
What is a NADA book value?
The NADA book value is an important factor in determining the worth of a vehicle in the automotive industry. The National Automobile Dealers Association (NADA) provides comprehensive market data and analysis to establish accurate vehicle valuations. The NADA book value considers several factors, including make, model, year, condition, mileage, and regional market conditions. In Delaware, the NADA book value is now used as a benchmark for buyers, sellers, and lenders to determine fair prices and make informed decisions. It contributes to market transparency and consistency by providing a reliable reference point for determining the value of vehicles in the state.
Which state has the lowest car sales tax rate?
The states with the cheapest car tax are Alaska, Delaware, Montana, New Hampshire, and Oregon, with a nominal tax rate of zero (even though, as we’ve seen, the reality is a bit more complex). Nevada's tax rates are zero on private-party car sales, though not on dealership purchases.
If you really want to avoid car sales tax, you might consider moving to one of these states.
With the exception of the above states, each state charges sales tax on every private-party car purchase. States such as Oklahoma, North Carolina, Colorado, and Alabama charge some of the lowest vehicle sales tax rates on motor vehicles.
Can I buy a car in Alaska to avoid paying sales tax?
Nonresidents can’t avoid paying sales tax by purchasing a car in Alaska because they’ll still owe the car tax in their state of residence when they register the vehicle. Sales tax is paid to the state of registration rather than the state of purchase.
And don’t forget about the costs of registration and titling. Wherever you purchase your car, you’re due registration, title, and license plate fees. Keep in mind that purposefully avoiding paying sales tax is a criminal offense.
But if you find a car you absolutely love in Alaska, give our Alaska car transport guide a read and learn how you can bring it home.
Does Delaware have excise taxes?
Excise taxes are levied in Delaware. Excise taxes are levied on specific goods or services, such as gasoline, cigarettes, and alcoholic beverages. Delaware's excise taxes include:
- Gasoline tax: Delaware has a 23.00¢ per gallon gasoline tax.
- Cigarette tax: Delaware has a $2.10 per pack cigarette tax.
- Alcohol tax: Delaware has a graduated alcohol tax, with rates ranging from $1.10 per gallon for beer to $13.25 per gallon for distilled spirits.
What are sales and use tax?
Sales tax, as we've established, is a percentage charged on the sale of a vehicle in a state. Sales tax is calculated on the purchase price of a vehicle.
Many states have a separate “use tax” that is pretty much the same thing as sales tax, and you’ll pay one or the other, depending on your status. In most cases, the tax rate is the same for both.
Use tax often applies when you purchase a vehicle outside of your state but intend to register and use it in your state. If you didn't pay any sales tax (or paid less than your state's standard rate) at the time of purchase, you might owe a use tax when you register the car in your state. It basically levels the playing field and makes sure that cars bought in the state and cars brought into the state are taxed the same way.
Let's say you bought a used Aston Martin in Delaware and didn’t pay any vehicle sales tax, given Delaware’s 0% tax rate. You want to register the car in Idaho. You’ll pay Idaho's 6% tax plus any applicable county surtax.
If you need to calculate sales tax, make sure you use our sales tax calculator.
Is all of Delaware tax free?
The state of Delaware does not have a statewide or local sales tax, but it does have a gross receipts tax that is levied on businesses that sell goods (tangible or intangible) or provide services within the state.