Shopping for a new car can be stressful, especially in California, where regulations, discounts, and fees can get complicated.
Not sure where to start? Here are five things to know when buying a new car in California.
- Sales Taxes and Fees Can Vary
California has the highest sales tax in the U.S., charging a minimum of 7.25% plus district taxes. How much you’ll pay depends on where you register your vehicle.
For example, the combined sales and use tax in Alameda County is 10.25%-10.75%, depending on the city. Expect to pay around 8.6% if you register your car in San Francisco, or 9% if you register it in Corte Madera, Fairfax, Stockton, or Montclair.
However, you may be able to deduct some of this when filling out Forms 1040 or 1040-SR. The maximum deductible amount is $10,000 per year.
To get an estimate, use a sales tax calculator. After that, enter your data into the sales tax deduction calculator provided by the IRS.
Take into account the following costs, too:
- Vehicle registration fee: These depend on your city or county and the vehicle’s weight, number of axles, purchase price or declared value, and other factors. (You can use the DMV’s vehicle registration and licensing fee calculators.)
- Title transfer fee: $15
- Smog transfer fee (if applicable): $8
- California Highway Patrol (CHP) fee: $32+
- Vehicle license fee (VLF): 0.65% of the vehicle’s market value
- Dealer documentation fee: Maximum $85
These fees and others can add a few hundred dollars to the total cost of buying a new car in California. Your local DMV can help you sort out how much you’d have to pay for the vehicle you are considering.
- There Are Rebates and Incentives Available on New California Vehicles
Planning to buy a brand new electric vehicle (EV)? Then you may apply for a $7,500 tax credit. (And, yes, Jeep does have a line of EVs and plug-in hybrid electric vehicles that would qualify!) Eligibility criteria include:
- Purchase the vehicle for personal use, not for resale
- Drive your new car primarily in the U.S.
- Buy an EV with a battery capacity of 7+ kilowatt hours
- The gross vehicle weight cannot exceed 14,000 pounds
- Have a modified adjusted gross income of no more than:
- $225,000 for heads of households
- $300,000 for married couples
- $150,000 for all other categories (e.g., single individuals)
- The sticker price is up to $80,000 for SUVs, pickup trucks, and vans and up to $55,000 for other types of cars
Note that President Trump has threatened to revoke the federal EV tax credit, but it looks like it’s still in place so far – though we don’t know for how long.
If you purchase a used EV, you may qualify for a $4,000 tax credit. Apart from that, there are several other rebates and incentives available for new and used vehicles, such as:
- Southern California Edison’s Pre-Owned EV Rebate: $1,000-$4,000
- Clean Vehicle Rebate Project (CVRP): $1,000-$7,000
- Local rebate programs: $500-$4,000+
For example, El Dorado County is offering a $599 incentive for the purchase or lease of a new EV. To qualify, you must fill out the application form before signing a purchase or lease agreement, among other requirements.
Most programs require pre-approval and have strict eligibility conditions. Whether you qualify and how much you can receive depends on your income, location, and type of vehicle.
- There’s a Car Buyer’s Bill of Rights
The California Car Buyer’s Bill of Rights protects consumers who purchase new or used vehicles from licensed dealers. This state law went into effect on July 1, 2026, ensuring transparency in financing, pricing, and warranties.
For instance, dealers must disclose the vehicle price without extra options and add-ons. The law also requires them to:
- Provide a copy of the credit score used to assess your loan application.
- Charge lenders no more than 2% of the loan amount if your loan term is longer than 60 months, or a maximum of 2.5% for terms of 60 months or less.
- Give you a clear breakdown of how much you are financing and what you must pay each month.
- Get your consent before adding any charges to the contract.
- Tell you exactly how much you’ll pay for insurance and other services included in your monthly payments.
These regulations are meant to protect buyers from unscrupulous dealers and ensure they get a fair price.
For example, the 2%-2.5% markup limit on dealer-arranged financing prevents them from charging excessive interest on top of the lender’s fees. The requirement to disclose credit scores, on the other hand, helps buyers understand how their financial standing affects their loan terms.
- Your Insurance Rates Could Change
New cars typically cost more to insure because of their high market value. That’s because if you get involved in an accident, your new vehicle will cost more to repair or replace than an older one.
However, there are steps you can take to bring the costs down:
- Shop around: Request multiple quotes from different insurance providers. Compare them on a like-for-like basis to make sure you get the most bang for your buck.
- Apply for insurance discounts: All major insurers offer discounts, but you have to ask about them. For example, you could save money by paying for your policy in full upfront, bundling policies, or insuring multiple cars with the same company.
Most insurance carriers also offer discounts of up to 15% for equipping your vehicle with an anti-theft system, anti-lock brakes, or other safety features. Cars less than three years old may qualify for insurance discounts of 10-15%, depending on the carrier.
- Drive safely: Maintain a clean driving record to qualify for good driver discounts. If you get a ticket, attend a California traffic school to mask the point from your license. With this option, the conviction will be hidden from insurance carriers and prevent them from raising your premiums.
- Increase your deductible: A higher deductible translates into lower monthly insurance premiums. Even though you’ll pay more out-of-pocket in the event of a claim, you could save thousands of dollars per year.
- Go green: Lemonade, Travelers, and other insurance carriers offer discounts for hybrid or electric cars. Their policies include the same coverage options as for any other vehicle.
5. Market Conditions Make Now a Good Time to Buy
This may be the best time to buy a car, given Trump’s tariffs on steel and aluminum imports. According to The New York Times, these charges could increase car prices by $4,000 to $10,000 or more.
Another reason to act now is that most dealers are starting to clear out their 2024 inventory for newer cars. Therefore, you might get better deals or financing options while avoiding future price hikes.
The bottom line? Now could be a great time to buy a car in California. Take the time to compare car models, check your financing options, and search for special offers before making your next move.
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