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Understand the Road Tax Game Before Buying a Car: Lifetime Tax vs 5-Year Tax — Which Is Better?
Buying a car is a dream for many, but owning it comes with long-term expenses — fuel, maintenance, insurance, and most importantly, road tax. When registering a new car, you usually get two options:
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Pay Lifetime Road Tax (LTT)
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Pay Road Tax for 5 Years and Renew Later
Most people get confused about which one is more beneficial. Here’s a simple explanation to help you decide.
Lifetime Tax vs 5-Year Tax: What’s the Difference?
1. Lifetime Road Tax (LTT)
• One-time payment valid for the vehicle’s registered life, usually 15 years
• Higher upfront cost but becomes cheaper overall in the long run
• No need to remember renewals or deadlines
• Better resale value — the next owner won’t have to pay tax again
• But if you move to another state, you may need to pay taxes again as per that state’s rules and then claim a refund (a slow process)
2. 5-Year Road Tax (Periodic Tax)
• Lower upfront cost, easier on the pocket at the time of purchase
• Needs to be renewed after every 5 years
• If you forget the renewal date, penalties may apply
• Slightly lower resale value — buyers know they must pay tax again
• More convenient for people who shift between states frequently
Comparison Table
| Point | Lifetime Tax (LTT) | 5-Year Tax |
|---|---|---|
| Duration | Valid for up to 15 years | Valid for 5 years, needs renewal |
| Cost | High upfront, cheaper long-term | Low upfront, more expensive over 15 years |
| Convenience | No renewals or penalties | Renewal every 5 years |
| Resale Value | Higher resale value | Slightly lower resale value |
| Moving States | Complicated refund process | More flexibility if relocating |
Which Option Is Better?
Choose Lifetime Tax (LTT) if:
• You plan to keep the car for 10 years or more
• You don’t want the hassle of renewing tax every few years
• You will stay in the same state for a long time
Choose 5-Year Tax if:
• You plan to sell the car within a few years
• You have a transferable job and might move to another state
• You prefer lower upfront cost when buying the car
