My 2014 Tacoma Value

Hi Donald,

I'm not sure I agree with this logic. It is my understanding that sales tax is paid on the full selling price of the vehicle, and not after the trade-in value is subtracted.

If what you are saying is true, the folks who make massive down payments on new vehicles would pay less tax than those who do not. There's no way the State would go for that.

 

In some states, like his (and mine) if you buy a new car you pay tax on the sale price. $20,000 car, pay tax on $20,000.

If you trade in on a new car, you pay tax on the difference between the amount that gave you for the trade and the new car price. $20,000 car with a $12,000 trade in, pay tax on $8,000.

If you trade in on a used car, you pay tax on the full sale price of the car. $20,000 used car with $12,000 trade in, pay tax on $20,000.

Your point about "massive down payments" paying down the tax is inaccurate.

I assume that the states that do this probably had dealer / mfg lobbyists petitioning the legislature to write it into law as a way to make it easier to sell new cars.

 

Hmm. That's interesting, and that's definitely not how it works in my State (MI). I wish it was.

Out of curiosity, would these dealers in your States treat the tax the same way if you had a down-payment instead of a trade in? Or are you saying this is a bit of a legal tax loophole for only trade-ins on new cars? I wonder how they'd treat a $1,000 trade-in with $10,000 in the glove box?

I need to get myself a list of these more favorable States in preparation for my next purchase

Thanks

 

My state VT is the same as Donald's and Meefzah. VT gives you 3 months before or after to recoup sales tax. Sooo, if I sell privately or trade, I get credit for my vehicle. It has to be a like for like sale. Down payments do not matter. It is strictly whatever the price of the truck, boat, motorcycle, etc. is. One thing they do though (which kinda stinks) is if you buy privately (no dealer involved), they tax you on book value no matter what your bill of sale reads. You do have the option to get whatever you are trying to register "appraised". VT DMV has a form and of course whoever appraises it has to have a dealer license & it costs you. I do like the tax credit thing except when I purchase privately at a good deal, it doesn't matter, they get their $$.

OP good luck with your situation, I hope it works out for you.

 

Unless you live in California, Hawaii, Kentucky, Maryland, Michigan, Montana or Virginia then you pay tax on net cost.

So if truck is 25K and trade in is 5K, you are taxed on the 20K. If down payment is 15K, you are still taxed on the 20K (would be nice if the down payment did reduce tax liability though!)

 

Wow. I'm in the vast minority. What a pity. Motor City my ass . . .

 

They have to fund the entitlements somehow. From your pocket into another. Good ol' liberal politics at work.

 

Won't you have major negative equity by trading in your truck this early in your lease? The dealer will need to pay off the lease balance and then pay the buy back amount in order to resell it. This is most likely much higher than the current value of the truck unless you put down a large down payment.

 

Hate that word... entitlements. Going to keep my mouth shut so I don't hijack this thread though.

 

Entitlements. Meaning paving roads and giving you fire stations, interstates, healthcare, Social Security. Kyitty, meet you in PM.

No interstates, no fresh food, no spare parts,etc.

 

To enter the discussion on the tax rate on the trade in vs cash.
I believe it has to do with the wording of the tax code, per state.
There is excise tax, and sales tax.
Excise taxes the amount of cash exchange, while sales tax would be on the transaction total.
Not an expert, just how I understand it.
In Hawaii, we do not have a sales tax.
The tax is called general excise, and occurs at every transaction of funds, multiple times on some goods, services, even rent, food, medications.

 

In Nevada, you pay tax after the trade-in value. Since you payed tax already on the trade-in when you bought it, you then pay tax on the remainder of the balance. Here, it's 8.1% tax, and it's sales tax, not excise tax. It's still tax whatever they want to call it. Cash or credit purchase, you pay. I payed cash minus $2000 for my POS Dakota (14 years old) trade-in. Still got soaked.

 

I squeeze them for everything. I also consider each (Trade and Buy) an independent deal.

 

Lease as opposed to finance? Either way you are financing and paying interest. If you lease and have a business to take tax deduction great or if you need the lower payment great but you are restricted as to total mileage and the ability to modify. [you don't own it it's not yours] and at the end of the lease you walk with no equity. Finance rates are at an all-time low 0% on some new car loans And< 2% for up to 72 months on a late model used truck with good credit so if you plan on keeping it and your credit is good financed purchase is the way to go.

 

So I guess states that dont tax car purchases dont have any of the items you listed above?

With the money raised via sales tax (and gas tax) you would think our interstates would be in better shape ( one of the worst in the developed world). The money is going somewhere bud, but get off your "soap box thinking" that it mainly benefits the party that it's taken from.