Trade in with a loan question

[Balr14]

CarMax is definitely a viable option. I usually buy used high-end performance cars (Porsche, Mercedes, etc.) that are at least 5 years old and CarMax eliminates a lot of the hassle and worry associated with that kind of car. But remember, in many states if you sell you old car instead of trading it in, you will have to pay the sales tax based on the entire value of the new car you purchase. For me, that usually means at least $2500 difference.

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[ivantwilliams]

Really? I never knew this. But, confused. When you purchase a new car (or any item in America for that matter), are you not paying tax anyway?

But remember, in many states if you sell you old car instead of trading it in, you will have to pay the sales tax based on the entire value of the new car you purchase. For me, that usually means at least $2500 difference.

 

[Mustang5ohMan]

Really? I never knew this. But, confused. When you purchase a new car (or any item in America for that matter), are you not paying tax anyway?

Yeah that’s why you have the option sometimes on the trade in. The use the trade value the whole value towards the new car value which saves you on the taxes.

 

[Armageddon Turbo]

"IF" the dealer gives you more for trade in than the balance of your loan then the loan will be paid off and the difference can go toward the trade. More likely, when they give you less for your trade than you owe on the loan then the balance of the loan would be applied to the new loan and you would owe that balance plus the balance for the new car - not a good position to be in.

This is most likely scenerio.

 

[Balr14]

Really? I never knew this. But, confused. When you purchase a new car (or any item in America for that matter), are you not paying tax anyway?

If you trade in a car, you pay sales tax on the difference between the trade-in value and the new car, not the entire cost of the new car. If you have no trade-in, you pay sales tax on the entire cost of the new car. However, some states allow you a sales tax credit if you sell your old car and purchase a new one within a certain time frame. I do not know which states have this latter policy, nor how it is managed.

Of course, car dealer associations are highly opposed to this policy, because getting a tax break only on a trade-in is a huge benefit to them. It pretty well negates the profit you would get by selling the old car yourself.

 

[key01]

If you trade in a car, you pay sales tax on the difference between the trade-in value and the new car, not the entire cost of the new car. If you have no trade-in, you pay sales tax on the entire cost of the new car. However, some states allow you a sales tax credit if you sell your old car and purchase a new one within a certain time frame. I do not know which states have this latter policy, nor how it is managed.

Of course, car dealer associations are highly opposed to this policy, because getting a tax break only on a trade-in is a huge benefit to them. It pretty well negates the profit you would get by selling the old car yourself.

As of January 1 this year in Illinois the maximum trade-in tax credit is limited to the first $10,000, which totally blows. If you are trading in a $40K GT350 on an $80K GT500, you pay tax on $70K, not $40K like pre-2020. I wish 2020 would just end already.

 

[AGM2018]

As of January 1 this year in Illinois the maximum trade-in tax credit is limited to the first $10,000, which totally blows. If you are trading in a $40K GT350 on an $80K GT500, you pay tax on $70K, not $40K like pre-2020. I wish 2020 would just end already.

Yet another reason to NOT LIVE in Illinois. That law, as you said, "totally blows."

 

[Brazos609]

I owe 27k on my car kbb value is 29-30k for trade in if I got a gt350 for 60k my loan of 27k would be added on to the 350 loan right? Or would it be a little positive equity to go towards the new car? Thanks

If you really don't know if buying a new $60k GT350 will cost you $57k+TT&L or $87k+TT&L you probably shouldn't be buying anything.

 

[IrishStallion]

Lol. Wow is all I can say.

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