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Texas Car Loan Laws

Texas sets rate ceilings on dealer financing by the age of the car, watches dealer doc fees, and lets lenders repossess without warning once you default.

Updated By Lenditia Editorial Team 6-minute read No right to cure

In short

A Texas dealer contract can carry up to the 18% alternate rate on newer cars, and more on older ones: the 2026 chart allows about 21% to 27% APR on 2023 and older models. Dealers may charge a documentary fee up to $225 without filing a cost analysis. Texas gives no right to cure before repossession, so a single default can lead to the car being taken. The Office of Consumer Credit Commissioner (OCCC) licenses dealers and lenders who finance cars.

Right to cure
None in state law
Newer-car ceiling
18% APR
Doc fee threshold
$225
Vehicle sales tax
6.25%
Map of the United States with Texas highlighted

Texas car-finance rules at a glance

Texas No right to cure No general right to cure in state law Checked Oct 26, 2026
Right to cure
None; repossession may follow any default
Rate ceiling
18% on 2024+ models; about 21%–27% APR on older ones (2026 chart)
Dealer-arranged contracts under Finance Code ch. 348; banks and credit unions follow their own rules.
Doc fee limit
$225 unless the dealer files a cost analysis with the OCCC
After repossession
Notice before sale; you may redeem; deficiency allowed
Vehicle sales tax
6.25% of the price minus trade-in
Regulator
Office of Consumer Credit Commissioner (OCCC)

How much interest a Texas car loan can carry

Texas caps the finance charge on a retail installment contract, the paperwork you sign when a dealer arranges the loan. Chapter 348 of the Finance Code sets the ceilings, and the OCCC publishes them each year as a rate chart. The ceilings depend on the model year: the older the car, the higher the rate the law allows.

Texas maximum rates on motor vehicle installment contracts, January 1 to December 31, 2026
Vehicle (2026 sales)CeilingAPR at 60 months
2024 model year or newer18% alternate rate18%
2022 or 2023 model year$12.50 add-on per $100 a year21.05%
2021 model year or older$15.00 add-on per $100 a year24.68%

The add-on figures are how the statute counts; they are not an APR, and dealers may not quote them to you as one. Your contract must show the APR, which is the number to compare. A ceiling is a limit, not a typical price: borrowers with good credit usually get far less, so check what the rate means in dollars with the car payment calculator.

Dealer fees you will see on a Texas contract

  • Documentary fee. The OCCC treats a doc fee of up to $225 as reasonable. A dealer that wants to charge more must first file a cost analysis with the OCCC, and the agency can order refunds of an unsupported fee.
  • Sales tax. Texas charges 6.25% motor vehicle sales tax on the price minus your trade-in allowance. A dealer collects it; in a private sale you pay the county tax office within 30 days.
  • New residents. If you move to Texas with a car already registered in your name elsewhere, you pay a $90 new resident tax instead of the use tax.
  • Add-ons. Service contracts and GAP waivers are optional. If you finance them, they raise the amount you pay interest on.

What happens if you fall behind in Texas

Texas has no statute that gives car buyers a right to cure, meaning a notice and a set number of days to catch up before the lender acts. Once your contract says you are in default, the lender may take the car without going to court, as long as the repossession agent does not breach the peace. Your contract defines default, so read the late-payment terms before you sign.

  1. Repossession. The agent may take the car from a driveway or a street, but not by force, threats or over your objection on the spot (Business and Commerce Code §9.609).
  2. Notice before the sale. The lender must send you a written notice before it sells the car, saying when and how it will be sold (§9.611 to §9.614).
  3. Your chance to redeem. Until the sale, you can get the car back by paying the full balance plus the lender's reasonable costs (§9.623).
  4. The deficiency. If the sale brings less than you owe, you remain liable for the rest, and the lender must explain how it worked out the figure (§9.615 and §9.616).

Our guides to repossession and the balance left after a sale explain how to respond at each step.

Where to check a lender and complain

Dealers that finance their own sales and companies that buy those contracts need a motor vehicle sales finance license from the OCCC. Banks and credit unions are supervised by their own regulators, and the federal Consumer Financial Protection Bureau takes complaints about any auto lender.

Office of Consumer Credit Commissioner

Licenses motor vehicle sales finance companies, publishes the rate charts and takes complaints at 800-538-1579.

Texas Attorney General

Handles complaints about deceptive dealer practices under the Deceptive Trade Practices Act.

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 car loan in Texas?

For dealer-arranged contracts on 2024 and newer vehicles in 2026 sales, the ceiling is the 18% alternate rate. Older models can carry more: about 21% APR for 2022 and 2023 models and close to 25% APR for 2021 and older over 60 months.

How much can a Texas dealer charge for a doc fee?

Up to $225 without any filing. A dealer that charges more must have filed a cost analysis with the OCCC first.

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

Not by law. Texas has no right-to-cure notice, so the lender can repossess after a default without warning. It must send a notice before it sells the car. See what to do when you fall behind.

Do I pay sales tax on the full price if I trade in a car?

No. Texas taxes the sales price minus the trade-in allowance at 6.25%.

Sources

Facts on this page were checked against these sources on October 26, 2026. The OCCC publishes new rate ceilings each January.

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