Many lenders allow a borrower to finance vehicle tax with a truck loan. The approval depends on several factors, such as credit standing and the bank's determined loan-to-value ratio. If the truck is new, you may have rebates in place to help offset taxes. Otherwise, the bank may approve your loan but ask for a down payment.
Tax Amount
Your tax amount can prove costly, depending on where you live. If you purchase a new truck for $40,000 and live in an area with a tax rate of 8 percent, your tax charges are $3,200. Some states recognize a trade in as a tax deduction, so ask your dealer if you can deduct your trade value from the vehicle's purchase price before applying tax. Rolling thousands of dollars into your loan creates a negative equity position, which can cause problems if you try to trade or resell in the future.
Loan-to-Value Ratio
Banks determine how much to lend based on a vehicle's loan-to-value ratio and other credit information. If you have excellent credit, the bank may lend up to 120 percent of the truck's bank-determined value. The value is based on the year, make and model of the truck you choose, along with additional features. If you purchase a truck for a price that exceeds bank values and attempt to roll another loan balance (in the event of an upside trade) and taxes, your application may be declined. A bank may also request that you put thousands down to reach your loan-to-value ratio, which may be as low as 60 percent.
Debt-to-Income Ratio
Even with excellent credit, you can still find yourself required to provide a down payment because of your debt-to-income ratio. Your lender reviews your monthly debts, including loans, credit card and housing payments to decide your maximum monthly payment amount. Even if you make $100,000 a year, you are not guaranteed a loan that covers full truck value and taxes. Your lender may require you to find a truck with a maximum monthly payment based on your debt-to-income ratio, and you may have to shop accordingly. Get a pre-approval before you head out to shop.
Budgeting
Unless you obtain a zero percent loan, expect to pay interest on your tax charge, which is unadvisable. Before you decide to roll tax charges into your loan, use an auto loan calculator to check differences in monthly payment and overall payback cost. If your taxes amount to $3,000, you can expect an increase in monthly payment of about $60 a month. Even if obtaining a loan is not an issue, carefully examine your budget and determine if rolling your taxes into your loan is affordable.
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