Financing your own sales in Tennessee: buy here pay here rates, repossession and GPS rules
Last verified: November 9, 2026. Every rule links to its official source.
Buy here pay here in Tennessee needs the dealer license; we found no separate license for in-house financing, so confirm with the Department of Financial Institutions (TDFI) or counsel. The Retail Installment Sales Act’s rate cap does not apply to cars (T.C.A. 47-11-102); have counsel confirm what limits apply. GPS tracking of an occupant needs every owner’s consent (T.C.A. 39-13-606).
Tennessee buy here pay here at a glance
| What | The rule | Source |
|---|---|---|
| Dealer license | Needed to sell or offer more than 5 vehicles a year; $600 | TMVC: dealer license |
| Separate finance license | None found for a dealer’s own contracts; confirm with TDFI or counsel | TDFI: industrial loan and thrift |
| Rate cap | The Retail Installment Sales Act’s cap does not apply, because the Act’s “goods” exclude motor vehicles. Have counsel confirm what limits apply | T.C.A. 47-11-102 |
| Time-price differential | Not treated as interest | T.C.A. 47-14-120 |
| Documentary fee | Separately stated on the contract or invoice | T.C.A. 55-17-114 |
| Sales tax | 7% state plus local tax, on the price minus the trade-in | DOR Automobile Dealership Manual |
| Repossession tax credit | The unpaid balance minus $500, on the current return | DOR Automobile Dealership Manual |
| Repossession | No court needed if there is no breach of the peace; consumer sale notice under 47-9-614(a)(1) since July 1, 2026 | T.C.A. 47-9-609; Public Chapter 704 of 2026 |
| GPS tracker | All owners’ consent to follow an occupant; without it, a Class A misdemeanor | T.C.A. 39-13-606 |
| Collecting your own accounts | No collection agency license needed | T.C.A. 62-20-103 |
Do you need a license to finance your own car sales in Tennessee?
You need the Tennessee Motor Vehicle Commission (TMVC) dealer license to sell or offer more than 5 vehicles a year. Beyond it, we found no license written for a dealer that carries its own notes, but no regulator says so in writing. Treat it as a question for TDFI or counsel, and settle it before your first financed deal.
What the statutes we read show:
- The lender registration is for lenders. TDFI registers industrial loan and thrift (ILT) companies, and the ILT Act “applies only to persons engaged in business as industrial loan and thrift companies” (T.C.A. 45-5-104). It defines them as businesses making loans, and its “loan charges” do not include time-price differentials (T.C.A. 45-5-102). A time-price differential is the finance charge in a credit sale: the difference between the cash price and what the buyer pays over time.
- TDFI’s page is silent on dealers. Its ILT registration page does not mention dealers, retail installment contracts or time-price differentials.
- Collecting your own accounts needs no collection license. T.C.A. 62-20-103 says the collection chapter does not require a business “that collects only the individual’s or its own unpaid accounts” to be licensed by the Collection Service Board. Collecting for a parent, subsidiary or affiliated firm is also exempt.
Write to TDFI’s licensing staff at TDFI.licensing@tn.gov or call (615) 253-6714, and keep the answer in your files. The dealer license itself is covered in How to get a Tennessee dealer license, and the whole startup path in How to start a used car dealership in Tennessee.
If a related company lends or buys your contracts
A company that makes loans is the kind of business the ILT Act covers. ILT applications, amendments and renewals go through NMLS, the national licensing system, and “a separate certificate of registration shall be required for each office” (TDFI).
Since July 1, 2025, a registered ILT company may charge up to a maximum effective rate of 36% a year on loans of $100 or more (Public Chapter 70 of 2025). That rate is for loans, not for your own credit sales. Whether a related company that only buys your contracts needs a license is not answered by anything we read, so ask TDFI.
What can you charge on a Tennessee buy here pay here contract?
Tennessee’s Retail Installment Sales Act, with its $11.75 per $100 cap, does not apply to motor vehicles. Have counsel confirm what limits apply to your contracts.
The reason is in the Act’s definitions. “Goods” covers all personal property but excludes “money, motor vehicles, or mobile homes” (T.C.A. 47-11-102), and the cap in T.C.A. 47-11-103 applies to goods.
| Rule you may see quoted | Does it govern your car contract? | Source |
|---|---|---|
| Retail Installment Sales Act rate cap | No. The Act’s “goods” exclude motor vehicles | T.C.A. 47-11-102 |
| The same Act’s contract contents, prepayment and statement-fee rules | No, for the same reason | T.C.A. 47-11-103 |
| General interest-rate rules | A time-price differential “shall not be deemed to bring a transaction within any regulation of interest” | T.C.A. 47-14-120 |
| Industrial loan and thrift rate, 36% a year | Only for a registered ILT company’s loans | Public Chapter 70 of 2025 |
This does not mean Tennessee sets no limit on a car contract. Have a Tennessee attorney review your contract form and your rates before your first financed sale.
Late charges
The Retail Installment Sales Act’s late-charge rules do not reach car contracts, and we found no Tennessee late-charge limit written for them. That is not proof there is none. You should set your late charge with counsel and state it in the contract.
What the contract should carry
- A trade-in lien. You may include in a motor vehicle retail installment contract the amount paid to discharge a lien on the trade-in (T.C.A. 47-14-120).
- The documentary fee. A document preparation, processing or servicing fee must be “separately stated” on the contract or invoice (T.C.A. 55-17-114). In price ads the fee stays out of the price, but the ad must list and describe it and state its amount, and the Commission’s advertising rule, 0960-01-.12, reaches “any dealer-imposed fee, by any name”.
- Tracker consent. If the car will carry a tracking device, the contract should carry each buyer’s written consent (see the GPS section below).
If a deal waits on outside funding rather than your own note, the conditional delivery rules apply; they are in After the sale in Tennessee.
How are GAP and service contracts taxed in Tennessee?
GAP waiver charges are not subject to Tennessee sales tax. Extended warranties and service contracts covering the repair and maintenance of motor vehicles are (DOR Automobile Dealership Manual).
We checked only how the two products are taxed, not the rules for selling them. Ask counsel before you add either to a deal.
How does sales tax work when you finance the sale?
You collect Tennessee sales tax from the buyer as any dealer does: 7% state tax plus local tax, on the price after the trade-in. The Department of Revenue (DOR) dealer manual does not say when the tax is due on a sale you finance yourself, so ask DOR before your first one.
| Item on the deal | Taxed? | Source |
|---|---|---|
| Vehicle price minus the trade-in | Yes; list the trade-in by model and serial number on the invoice | DOR dealer webinar |
| Documentary or processing fee | Yes, part of the sales price | DOR manual |
| Service contract or extended warranty | Yes | DOR manual |
| GAP waiver | No | DOR manual |
| Separately itemized finance charges | No | DOR manual |
| Title and registration fees above the actual fees | May be taxable if included in the sales price | DOR manual |
Rates. The state rate is 7%. Local tax, at no more than 2.75%, applies only to the first $1,600 of a single article in almost all of Tennessee (T.C.A. 67-6-702). DOR lists the exceptions as “Hamblen County $300 (City of Morristown is $1600), and Hancock County the first $375” (DOR: Sales Tax on Motor Vehicles in Tennessee). A state single-article tax of 2.75% also applies “on any single item sold in excess of $1,600, but not more than $3,200”.
Filing. Monthly returns are due by the “20th day of the month following the end of the reporting period” (DOR: due dates).
Repossessions. When you repossess, DOR’s manual allows a credit “equal to the unpaid balance minus $500”, taken on the current sales tax return (Schedule A, Line 8).
Bad debts. The same manual lets you credit a bad debt, as defined in Internal Revenue Code section 166, on the current sales tax return for the period you write it off. Interest, sales tax and repossessed property are excluded.
What are the repossession rules in Tennessee?
After default you may repossess without going to court “if it proceeds without breach of the peace” (T.C.A. 47-9-609). The notice of sale you send a consumer buyer must include four items, under a section Tennessee replaced on July 1, 2026.
We found no Tennessee right-to-cure statute for vehicle contracts, and no license for repossession agents. Ask counsel about both before you rely on that.
The sale notice. Public Chapter 704 of 2026 put the consumer notice items at T.C.A. 47-9-614(a)(1)(A) to (D):
- The information 47-9-613(a)(1) requires.
- “A description of any liability for a deficiency of the person to which the notification is sent”.
- A telephone number from which the amount needed to redeem the car is available.
- A telephone number or mailing address for more information.
The statute’s own form, titled “NOTICE OF OUR PLAN TO SELL PROPERTY”, is in 47-9-614(a)(3), with instructions in (b). The items are the same in substance as before, but republished copies of the code still show the old numbering, so check your form against the official act. Ask counsel how far ahead of the sale to send it.
Deficiency. If you sue for a deficiency and cannot prove you followed the rules for the repossession and sale, T.C.A. 47-9-626 limits the deficiency.
LeftLane produces repossession reports from live data.
Can you use GPS trackers or starter-interrupt devices in Tennessee?
Trackers need every owner’s consent. Under T.C.A. 39-13-606, it is a Class A misdemeanor to knowingly install, conceal or otherwise place an electronic tracking device on a vehicle “without the consent of all owners of the vehicle” to monitor or follow an occupant.
- Borrowers count as owners. The statute’s “owner” “includes a person who has purchased a motor vehicle using a loan”.
- No dealer exception. The exceptions cover law enforcement, parents of minors, stolen goods or a stolen vehicle, and manufacturer systems. None covers a dealer or a lienholder.
- What to do. You should get each buyer’s written consent to any tracking device in the contract.
- Finding the car after default. Whether that counts as “monitoring or following an occupant” is a legal question. Ask counsel before you rely on a tracker for it.
We found no Tennessee statute on starter-interrupt devices. That is not the same as permission, so ask counsel before you install one.
Who examines a buy here pay here dealer in Tennessee, and what records do you keep?
The Motor Vehicle Commission can inspect all your books and records, and we found no TDFI examination program for dealers. Keep your records for as long as state or federal law requires.
- The rule. “All business records shall be kept for the period of time required by state or federal law or regulation” (rule 0960-01-.11). They may be written or electronic, kept on site or where you can reach them in a reasonable time, and open to inspection “during normal business hours by the Commission or its duly authorized representative”.
- Dead files count. Keep “any paperwork from an uncompleted deal where a credit application is received or a buyer’s/purchase order is prepared”.
- Insurance on temp-tagged financed cars. Where a dealer finances a used car, keeps the title and issues a temporary plate, failing to keep a record of the buyer’s liability insurance is a discipline ground (T.C.A. 55-17-114).
- Refusing access. Failing to make books and records available is also a discipline ground. The Commission’s civil penalties run from $100 to $5,000 for each day or each act of violation (rule 0960-01-.13; T.C.A. 55-17-117).
In LeftLane, each finance account keeps an activity log of payments, adjustments and status changes, and Metro 2 credit reporting files come from live data. The Department of Revenue and the Attorney General can also look at your deals; see who can inspect a Tennessee dealership.
What trips people up
- Pricing to a cap that does not govern cars. The Retail Installment Sales Act excludes motor vehicles. Get counsel’s read on your rates and contract.
- Taking silence as an answer on licensing. We found no dealer-finance license, but no regulator says so. Get TDFI’s answer in writing.
- A tracker without every owner’s consent. Placed to follow an occupant, it is a Class A misdemeanor, with no dealer or lienholder exception.
- An old repossession notice form. Since July 1, 2026 the consumer notice items sit at 47-9-614(a)(1). Check your form against Public Chapter 704.
- Leaving tax off the doc fee or service contract. Both are taxable. GAP waiver charges are not.
- Skipping the repossession credit. DOR allows the unpaid balance minus $500 on the current return.
- No insurance record on a temp-tagged financed car. That is a discipline ground on its own.
What changed recently
- July 1, 2026. Public Chapter 704 replaced 47-9-614, moving the consumer notice items to (a)(1)(A) to (D), and changed “authenticated” to “signed” in 47-9-611.
- July 1, 2025. Public Chapter 70 set the ILT maximum effective rate at 36% a year on loans of $100 or more. It matters only to a related company that lends.
Frequently asked questions
Do I need a license to finance my own car sales in Tennessee?
Beyond the Motor Vehicle Commission dealer license, we found no Tennessee license written for a dealer that finances its own sales. No regulator states that in writing, so ask the Department of Financial Institutions (TDFI.licensing@tn.gov, (615) 253-6714) or counsel before your first financed deal, and keep the answer.
Does the $11.75 per $100 cap apply to car contracts in Tennessee?
No. That cap is in the Retail Installment Sales Act, whose definition of goods excludes “money, motor vehicles, or mobile homes” (T.C.A. 47-11-102). A time-price differential is also not treated as interest (T.C.A. 47-14-120). That does not mean there is no limit, so have a Tennessee attorney confirm what applies.
What late fee can a Tennessee dealer charge on a financed car?
The Retail Installment Sales Act’s late-charge rules do not apply to car contracts (T.C.A. 47-11-102), and we found no Tennessee limit written for them. That does not prove there is none. Set the late charge with a Tennessee attorney and state it in the contract before you collect it.
Can I put a GPS tracker on a car I finance in Tennessee?
Only with consent. T.C.A. 39-13-606 makes it a Class A misdemeanor to place a tracking device on a vehicle without the consent of all owners to monitor or follow an occupant, and an owner includes someone who bought using a loan. There is no dealer exception, so get each buyer’s written consent in the contract.
Do I need a collection license to collect my own accounts?
No. T.C.A. 62-20-103 says the collection chapter does not require a business that collects only its own unpaid accounts to be licensed by the Collection Service Board. Collecting for a parent, subsidiary or affiliated firm is also exempt. Whether a company that buys your contracts needs a license is a question for TDFI.
Do I charge sales tax on GAP and service contracts in Tennessee?
Service contracts and extended warranties are taxable in Tennessee, and so is the documentary fee. GAP waiver charges are not, and neither are separately itemized finance charges, according to the Department of Revenue’s dealer manual. The tax is figured on the price after the trade-in.
What sales tax credit do I get when I repossess a car?
The Department of Revenue’s dealer manual allows a credit equal to the unpaid balance minus $500, taken on your current sales tax return (Schedule A, Line 8). A bad debt as defined in Internal Revenue Code section 166 can also be credited, excluding interest, sales tax and repossessed property.
Your next step
If you plan to carry your own notes, keep the contract, the signatures, the payments and the payment reminders in one system. In LeftLane, card and ACH payments post to the account on their own, and reminder texts go out on the due date and after a missed payment, each with a payment link. Start a free trial and call 512-222-9549; a real person will help you set it up.
Sources
- Tennessee Motor Vehicle Commission: dealer license
- Tennessee Department of Financial Institutions: industrial loan and thrift registration
- Secretary of State: Rules chapter 0960-01, revised June 2026
- Official public chapters: Public Chapter 704 of 2026 and Public Chapter 70 of 2025
- Tennessee Code Annotated, unofficial copies on Justia and FindLaw: 47-11-102, 47-11-103, 47-14-120, 45-5-102, 45-5-104, 62-20-103, 47-9-609, 47-9-626, 39-13-606, 55-17-114, 55-17-117 and 67-6-702
- Department of Revenue: Automobile Dealership Manual
- Department of Revenue: Tax Issues for Automobile Dealers webinar
- Department of Revenue: Sales Tax on Motor Vehicles in Tennessee
- Department of Revenue: sales and use tax due dates and rates
This guide is general information for dealers, not legal advice. Rules and fees change. Confirm with the agency or a licensed attorney in your state before you act.