Does New Jersey’s luxury surcharge come back when you buy out a lease?
There is a second New Jersey charge on expensive and thirsty new cars that is not sales tax and does not show up in most buyout math. Here is what the state says about it, and what it does and does not tell you about a buyout.
What is the NJ luxury and fuel-inefficient surcharge?
It is a one-time 0.4% surcharge that the state calls the Luxury and Fuel-Inefficient Vehicle Surcharge. The New Jersey Motor Vehicle Commission (MVC) runs it. The MVC’s page for dealers describes it as applying to new passenger vehicles, light trucks, SUVs and vans, and says new car dealerships collect it.
A new vehicle triggers it in either of two ways:
- the gross sales or lease price is $45,000 or more, or
- the vehicle’s average EPA rating, city and highway combined, is below 19 miles per gallon.
The price is measured before trade-ins and manufacturer rebates, so a rebate does not pull a car under the line. Leases count: the MVC says the price threshold applies to lease prices too.
Is it the same thing as sales tax?
No, and the state is explicit about it. The Division of Taxation’s luxury surcharge page says the Division does not administer this fee and that it is separate from New Jersey sales tax. Surcharge questions, including refunds, go to the MVC. Sales tax refunds go to the Division of Taxation.
That split is why the surcharge is easy to miss. It does not appear in a sales-tax calculation, and it is not on the tax line of a lease-end worksheet.
Does it apply when you buy out a lease?
The official pages do not say it does. Both describe the surcharge in terms of new vehicles and new car dealers, and neither mentions used vehicles or ownership transfers. A lease buyout is a purchase of a car that has already been titled and driven, not a new-vehicle sale by a dealership, so nothing on those pages points to a second surcharge at the end of your lease.
The important caveat is that the pages are silent on buyouts, which is not the same as saying a buyout is exempt. We have not found a statement from the MVC that addresses it directly, so treat this as a question to confirm rather than a settled answer. Ask your leasing company whether its payoff quote includes any state surcharge, and ask the MVC if you want it in writing.
Where to look in your own paperwork
If your car carried a sticker price at or above $45,000, or has a combined EPA rating under 19 mpg, check the documents you signed when the lease started. The surcharge is calculated on the lease price, so if it applied, it belonged to that original transaction.
As an illustration of the arithmetic only, 0.4% of a $45,000 price is $180. That is a small number next to the sales tax on a buyout, which is why it is worth knowing about but rarely changes the decision.
Then compare the figures that do belong to a buyout: your payoff, New Jersey sales tax of 6.625% and the MVC title and registration fees.
Is the threshold changing?
Bills that would raise the $45,000 threshold to $70,000 have been introduced in the New Jersey Legislature, including A5339 in the 2024 session and A923 in the 2026 session. We have not seen evidence that either has become law, so do not rely on the higher number. The MVC’s page is the place to confirm the current rule.
Luxury surcharge questions
Does New Jersey charge a luxury surcharge when you buy out a lease?
The official MVC and Division of Taxation pages describe the 0.4% Luxury and Fuel-Inefficient Vehicle Surcharge as a charge on new vehicles, collected by new car dealerships. They do not mention used vehicles or lease buyouts. Nothing on them says a second surcharge applies at buyout, but because they do not address buyouts directly, confirm with the MVC or your leasing company.
What price triggers the New Jersey luxury surcharge?
Per the MVC, a gross sales or lease price of $45,000 or more, or an average EPA rating below 19 miles per gallon. Trade-ins and manufacturer rebates are not subtracted when measuring the price.
Is the luxury surcharge part of sales tax?
No. The Division of Taxation says it does not administer the surcharge and that it is separate from New Jersey sales tax. The MVC administers it.
Does sales tax still apply when I buy out my lease?
Yes. A buyout is taxed at the New Jersey sales tax rate of 6.625% on the purchase price, and Lakewood’s UEZ rate does not change that for cars. See our guide on the UEZ.
General information based on the MVC and Division of Taxation pages as we read them on October 23, 2026, not legal or tax advice. Rules change, so confirm with the MVC.
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