Kentucky Car Loan Laws

Kentucky caps dealer finance charges by vehicle class, taxes cars at 6% after the trade-in, and gives no cure period before repossession.

Updated Oct 26, 2026 By Lenditia Editorial Team 6-minute read No right to cure

In short

Kentucky's Motor Vehicle Retail Installment Sales Act (KRS 190.090 to 190.140) caps what a dealer contract may charge, using add-on rates of $11, $13 or $15 per $100 a year depending on the model year. Over 60 months that works out to roughly 18.8% to 24.7% APR. The state charges a 6% motor vehicle usage tax on the price after your trade-in. Kentucky law gives no notice or cure period before repossession, so the contract's default terms decide when the lender may act.

Right to cure: None in state law
Rate ceiling: About 19% to 25% APR
Doc fee limit: No cap in state law
Vehicle sales tax: 6% usage tax

Map of the United States with Kentucky highlighted

Kentucky car-finance rules at a glance

Kentucky No right to cure No general right to cure in state law Checked Oct 26, 2026

Right to cure: None in state law; repossession may follow any default under the contract
Rate ceiling: $11, $13 or $15 add-on per $100 a year by class (about 18.8%–24.7% APR at 60 months); Dealer contracts under KRS 190.110; banks and credit unions follow their own rules.
Doc fee limit: No cap in state law
After repossession: Notice before sale; you may redeem until the sale; deficiency allowed
Vehicle sales tax: 6% usage tax on the price minus trade-in; no local tax
Regulator: Department of Financial Institutions; Motor Vehicle Commission for dealers

How much a Kentucky dealer contract may charge

KRS 190.110 sets the ceiling for a retail installment contract on a car. It sorts vehicles into three classes by model year and gives each an add-on rate: a dollar charge per $100 of principal for each year of the contract. A seller may instead charge simple interest, as long as the effective rate stays within the same ceiling.

Kentucky finance charge ceilings on motor vehicle installment contracts (KRS 190.110), shown for 2026 sales
Vehicle	Add-on ceiling	APR at 60 months
Class 1: new or used, 2026 model year or later	$11 per $100 a year	18.80%
Class 2: other new cars; used 2024 or 2025 models	$13 per $100 a year	21.79%
Class 3: all other vehicles	$15 per $100 a year	24.68%

The add-on figure is not an APR. Your contract must state the APR, and that is the number to compare with a bank or credit union offer. We converted the ceilings for a 60-month contract with equal payments; a longer term gives a slightly lower APR for the same add-on rate. Try your own numbers in the car payment calculator.

Fees and taxes at a Kentucky purchase

Documentary fee. The installment sales act does not set a dollar limit on a dealer's documentary or processing fee. Ask for it in writing and count it in the out-the-door price.
Usage tax. Kentucky charges a 6% motor vehicle usage tax, collected by the county clerk when the car is first titled or registered here. The statute adds no local tax on top.
Trade-in. For new and used vehicles alike, the taxable retail price is the price minus the trade-in allowance shown on a notarized affidavit. Without an affidavit, a new car is taxed at 90% of the sticker price.
Late charges. A contract may add a delinquency charge of 5% of the late installment or $15, whichever is greater, once a monthly payment is more than 10 days late.
Extensions. If the holder agrees to defer a payment, the service fee for the extension may not exceed $5, plus finance charges for the added time.

What happens if you fall behind in Kentucky

Kentucky's installment sales act does not require a notice of default or a waiting period before repossession. Once your contract says you are in default, the lender may repossess under the state's version of Article 9 of the Uniform Commercial Code (KRS chapter 355), as long as the agent does not breach the peace.

Repossession. The car may be taken without a court order, but not by force or over your objection on the spot.
Notice before the sale. The lender must send you a written notice before it sells the car, saying how and when it will be sold.
Redemption. Until the sale, you may get the car back by paying the full balance and the lender's reasonable costs.
Deficiency. If the sale brings less than you owe, you can be held liable for the rest. The sale must be commercially reasonable.

Clauses in which you confess judgment in advance or assign your wages are void in a Kentucky car contract. If you are behind, see what to do when you fall behind and whether voluntary surrender helps.

Where to check a lender and complain

Kentucky does not license motor vehicle sales finance companies as a separate category. The Department of Financial Institutions licenses consumer loan companies, and the Motor Vehicle Commission licenses and supervises dealers.

Department of Financial Institutions

Its Division of Non-Depository Institutions licenses consumer loan companies. The agency has an online complaint form and a general line, 502-573-3390.

Kentucky Motor Vehicle Commission

Licenses and supervises motor vehicle dealers, which write the installment contracts you sign at the dealership.

Consumer Financial Protection Bureau

Takes complaints about any auto lender or servicer, including banks and finance companies.

Questions people ask

What is the maximum interest rate on a dealer car loan in Kentucky?

It depends on the vehicle class. The add-on ceilings of $11, $13 and $15 per $100 a year equal roughly 18.8%, 21.8% and 24.7% APR on a 60-month contract.

Do I get a warning before my car is repossessed in Kentucky?

Not under state law. The lender may repossess once you are in default under the contract, but it must send a notice before it sells the car.

Does a trade-in lower the usage tax in Kentucky?

Yes. The 6% usage tax applies to the price minus the trade-in allowance stated in a notarized affidavit.

Is there a cap on dealer doc fees in Kentucky?

The state installment sales act sets none. Compare the fee across dealers as part of the total price.

Sources

Facts on this page were checked against these sources on October 26, 2026. APR figures are our conversion of the statutory add-on rates for a 60-month contract.