In states that have vehicle sales tax (like Missouri), you have to pay ~ 7.5% of the vehicle purchase price in taxes, all said and done. If, for instance, I bought a $10,000 vehicle, drove it for a couple months, decided I didn't like it, and sold it to buy something else (private party), is there any way to receive credit for taxes paid on that vehicle towards the next one? Seems like that's the case if you trade it in, but seems like you'd lose the same amount either way.
I'm not 100% sure of the answer to this question. But one thing that I was told was that if you trade in through a commercial dealer, you pay taxes on the difference between the price of the purchased vehicle and the credit for the trade. So if you trade in your $10k car for a $12k car, you pay on $2k. This seems to be a huge advantage for dealers, but civilians trading for themselves get screwed.
That is just my understanding, and I'd be interested in a more expert opinion as well.
AaronBalto wrote: I'm not 100% sure of the answer to this question. But one thing that I was told was that if you trade in through a commercial dealer, you pay taxes on the difference between the price of the purchased vehicle and the credit for the trade. So if you trade in your $10k car for a $12k car, you pay on $2k. This seems to be a huge advantage for dealers, but civilians trading for themselves get screwed. That is just my understanding, and I'd be interested in a more expert opinion as well.
I've always wondered why people trade in. Now I know.
AaronBalto wrote: I'm not 100% sure of the answer to this question. But one thing that I was told was that if you trade in through a commercial dealer, you pay taxes on the difference between the price of the purchased vehicle and the credit for the trade. So if you trade in your $10k car for a $12k car, you pay on $2k. This seems to be a huge advantage for dealers, but civilians trading for themselves get screwed. That is just my understanding, and I'd be interested in a more expert opinion as well.
very state specific to the state you are in. If we could do that in California I would be driving a very different car.
no, bend over and take it. 
OSULemon wrote:AaronBalto wrote: I'm not 100% sure of the answer to this question. But one thing that I was told was that if you trade in through a commercial dealer, you pay taxes on the difference between the price of the purchased vehicle and the credit for the trade. So if you trade in your $10k car for a $12k car, you pay on $2k. This seems to be a huge advantage for dealers, but civilians trading for themselves get screwed. That is just my understanding, and I'd be interested in a more expert opinion as well.I've always wondered why people trade in. Now I know.
Yeah, it's not that way in Oklahoma. You pay the tax on the purchase price of the vehicle you are getting.
Mostly people trade-in to avoid the hassle of selling the car themselves, even I do it.
I have a feeling with the NC Miata though, I will try to sell it myself in the spring vs trading it in. Some of the trade-in quotes I'm getting from the dealers are laughable. I understand they need to make money but 60% of retail is not acceptable.
In NY when you trade in the car the value of the trade in us deducted from the purchase price before tax is calculated so you are paying tax on a lower amount than the purchase price.
Wally wrote: In NY when you trade in the car the value of the trade in us deducted from the purchase price before tax is calculated so you are paying tax on a lower amount than the purchase price.
There is a plan to do this in Mi at last as well. What happens if you trade down from a $25k car to a $20k car? I assume you pay no tax, not get back the (incert tax rate for your state here)% back
In Delaware you pay tax on the book value of the car (no matter what you actually paid for it) when you title it. No credits that I know of.
OSULemon wrote:AaronBalto wrote: I'm not 100% sure of the answer to this question. But one thing that I was told was that if you trade in through a commercial dealer, you pay taxes on the difference between the price of the purchased vehicle and the credit for the trade. So if you trade in your $10k car for a $12k car, you pay on $2k. This seems to be a huge advantage for dealers, but civilians trading for themselves get screwed. That is just my understanding, and I'd be interested in a more expert opinion as well.I've always wondered why people trade in. Now I know.
Doesn't answer the question for me, there's no way the savings on sales tax comes close to offsetting craptastic dealership trade-in values.
Just be glad your not in Massachusetts. You don't pay sales tax on what you actually paid for the car if you bought it from a private party. NOOOO. You pay sales tax on what the Kelly Blue Book says the car is worth. Example. buy a 1980 TR7 for $1500 and go to registry. They access value of something ridiculous like 8 grand and you get to pay the tax on that. Buddy of mine just bought a 911 parts car and got hit for $1500 in sales tax, but he wanted to have the title, so he paid it.
toddk wrote: Just be glad your not in Massachusetts. You don't pay sales tax on what you actually paid for the car if you bought it from a private party. NOOOO. You pay sales tax on what the Kelly Blue Book says the car is worth. Example. buy a 1980 TR7 for $1500 and go to registry. They access value of something ridiculous like 8 grand and you get to pay the tax on that. Buddy of mine just bought a 911 parts car and got hit for $1500 in sales tax, but he wanted to have the title, so he paid it.
Ontario does the same thing.
toddk wrote: Just be glad your not in Massachusetts. You don't pay sales tax on what you actually paid for the car if you bought it from a private party. NOOOO. You pay sales tax on what the Kelly Blue Book says the car is worth. Example. buy a 1980 TR7 for $1500 and go to registry. They access value of something ridiculous like 8 grand and you get to pay the tax on that. Buddy of mine just bought a 911 parts car and got hit for $1500 in sales tax, but he wanted to have the title, so he paid it.
They're trying to do that in Indiana now. There's no real law about it, just seems to be the BMV trying to strong arm people.
Swank Force One wrote:toddk wrote: Just be glad your not in Massachusetts. You don't pay sales tax on what you actually paid for the car if you bought it from a private party. NOOOO. You pay sales tax on what the Kelly Blue Book says the car is worth. Example. buy a 1980 TR7 for $1500 and go to registry. They access value of something ridiculous like 8 grand and you get to pay the tax on that. Buddy of mine just bought a 911 parts car and got hit for $1500 in sales tax, but he wanted to have the title, so he paid it.They're trying to do that in Indiana now. There's no real law about it, just seems to be the BMV trying to strong arm people.
Thankfully Missouri taxes what the title says you paid for it, so I guess if you want to be shady, you could catch a break that way.
Finally something Illinois rocks at Sales tax is based on vehicle age. If the vehicle is older than a certain age.. Boom $25 sales tax. That age is like 2002
Swank Force One wrote:toddk wrote: Just be glad your not in Massachusetts. You don't pay sales tax on what you actually paid for the car if you bought it from a private party. NOOOO. You pay sales tax on what the Kelly Blue Book says the car is worth. Example. buy a 1980 TR7 for $1500 and go to registry. They access value of something ridiculous like 8 grand and you get to pay the tax on that. Buddy of mine just bought a 911 parts car and got hit for $1500 in sales tax, but he wanted to have the title, so he paid it.They're trying to do that in Indiana now. There's no real law about it, just seems to be the BMV trying to strong arm people.
I've heard they do that now here in Texas, but not had personal experience. The reason is that people would low-ball what they actually paid, knowing they would pay tax only on what they disclosed. So the State started using an "appraised" value based on blue book.
You also get a sales tax credit here for trading in your used car for a new one. And, no, that doesn't make up the difference between selling a car yourself and trading it in. Most people trade-in out of ignorance or because the difference between wholesale and retail isn't worth their while to deal with unwashed masses looking at their car. Having sold a couple of cars myself, I am sympathetic to that view.
nocones wrote: Finally something Illinois rocks at Sales tax is based on vehicle age. If the vehicle is older than a certain age.. Boom $25 sales tax. That age is like 2002
Yeah!!! One thing we did right!! 
toddk wrote: Just be glad your not in Massachusetts. You don't pay sales tax on what you actually paid for the car if you bought it from a private party. NOOOO. You pay sales tax on what the Kelly Blue Book says the car is worth. Example. buy a 1980 TR7 for $1500 and go to registry. They access value of something ridiculous like 8 grand and you get to pay the tax on that. Buddy of mine just bought a 911 parts car and got hit for $1500 in sales tax, but he wanted to have the title, so he paid it.
Wow that sounds like an awful idea. Hopefully that doesn't happen in Florida.
toddk wrote: Just be glad your not in Massachusetts. You don't pay sales tax on what you actually paid for the car if you bought it from a private party. NOOOO. You pay sales tax on what the Kelly Blue Book says the car is worth.
California will do this if the actual sales price is too far off the KBB value. A $10K (KBB) car for $8K (actual) you'll probably pay sales tax on $8K, a $10K car for $5K and they'll probably use the KBB value. Mainly this happened because people were misreporting the actual sales price.
Leasing a car is one way around the sales tax. When you lease a car, you're only buying the first N miles of use of it, so the sales tax is based on the expected depreciation during those miles. Obviously this only works in certain situations, though.
AFAIK, the only other (legal) way around it is to be a car dealer, they obviously don't pay sales tax on vehicles that they purchase (business model would be impossible otherwise), but that's got all kinds of other requirements, restrictions, and costs associated with it.
Washington does the tax on the state's value of the car thing too. They call it a "use tax" rather than a sales tax so they can this. They have their own (way high) values instead of blue book though. Every beater I drag home I make the seller complete the statement of value form that lists every thing that is wrong with the car so I can pat tax on the actual sales price. I once bought a $3000 Mercedes that they wanted to charge be tax on $10,000 for.
If you do a private party vehicle trade you only have to pay tax on the difference. I looked into this once, but it is not a standard procedure for the DMV so it would probably be a battle.
Wally wrote: In NY when you trade in the car the value of the trade in us deducted from the purchase price before tax is calculated so you are paying tax on a lower amount than the purchase price.
Same thing in SC, but our sale tax for vehicles is capped at $300.
But we also pay property taxes on vehicles based on what the county says its worth. My county also added a $25 road tax per vehicle.
toddk wrote: Just be glad your not in Massachusetts. You don't pay sales tax on what you actually paid for the car if you bought it from a private party. NOOOO. You pay sales tax on what the Kelly Blue Book says the car is worth.
Delaware does that using NADA guides - each clerk has a copy. They are pretty conservative with their values - that Celica I just bought booked at $1800 and they charged me about $50 in tax when I titled it.
Ohio you get the tax break trading it in, but only on a new car, not a new to you used car. Auto makers and dealers have a better lobbying group the the rest of us.
In reply to Swank Force One:
I haven't noticed that yet....
They gave me a hard time over the last parts car, finally had to show them pictures and let them know that i'd be perfectly willing to pay a higher sales tax if they could provide proof that i paid more than $300 for the car. Until then, they could go berkeley themselves.
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