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Old 11-27-2011, 12:27 PM
 
422 posts, read 877,856 times
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Default Questions regarding car trade ins at the dealership????

So I am thinking of getting a newer set of wheels and possibly trading in my older vehicle. If the sale price is established at $20,000 for the newer car and my trade in car is worth $5000.... Does the deal go down like scenario #1 or #2?

#1: $20,000 - $5000 = $15,000 then add taxes, fees etc


#2: $20,000 + fees, taxes - $5,000.

Is this negotiated both ways? Or does the dealer try to go #2 to "clear" more money? Any feedback back on your experiences would be helpful.
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Old 11-27-2011, 12:45 PM
 
Location: Chicago
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Quote:
Originally Posted by family first View Post
So I am thinking of getting a newer set of wheels and possibly trading in my older vehicle. If the sale price is established at $20,000 for the newer car and my trade in car is worth $5000.... Does the deal go down like scenario #1 or #2?

#1: $20,000 - $5000 = $15,000 then add taxes, fees etc


#2: $20,000 + fees, taxes - $5,000.

Is this negotiated both ways? Or does the dealer try to go #2 to "clear" more money? Any feedback back on your experiences would be helpful.
I guess it would vary by state. Where I live, provided the seller is a licensed dealer, the trade-in allowance is deducted before calculating the tax. If you're looking to negotiate the total cost as in "I want to pay X out the door including tax title and license" then you'll need to figure out how the sale will be taxed in your jurisdiction before walking in the door.
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Old 11-27-2011, 02:44 PM
 
Location: East of Seattle, originally from SF Bay Area
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Quote:
Originally Posted by Drover View Post
I guess it would vary by state. Where I live, provided the seller is a licensed dealer, the trade-in allowance is deducted before calculating the tax. If you're looking to negotiate the total cost as in "I want to pay X out the door including tax title and license" then you'll need to figure out how the sale will be taxed in your jurisdiction before walking in the door.
That's surprising. Here ans other states I have lived in, the trade is considered down payment, the tax is based on the price, in this case $20,000. Add any additional fees and subtract the trade (#2).
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Old 11-27-2011, 02:51 PM
 
Location: Minneapolis
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Depends on the state.

In MN, the new car buyer pays tax on the difference. Since used car purchases are also taxed, the state theoretically makes up the rest when the trade-in is resold.

Dealers here like this because it gives people a lot of incentive to trade their old car instead of keeping it and selling it themselves.
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Old 11-27-2011, 02:56 PM
 
Location: Chicago
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Originally Posted by Hemlock140 View Post
That's surprising. Here ans other states I have lived in, the trade is considered down payment, the tax is based on the price, in this case $20,000. Add any additional fees and subtract the trade (#2).
How nice of those states to double-dip, taxing the full value of the purchased car and then doing the same thing with the trade-in when it's sold too.
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Old 11-27-2011, 03:04 PM
 
Location: Minneapolis
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Quote:
Originally Posted by Drover View Post
How nice of those states to double-dip, taxing the full value of the purchased car and then doing the same thing with the trade-in when it's sold too.
That's been floated a few time in the past here to close budget gaps. The auto dealer's lobby usually puts a quick stop to that and it's dropped... Until the next biennium, of course.
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Old 11-27-2011, 05:05 PM
 
Location: East of Seattle, originally from SF Bay Area
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I'm not in favor of more taxes, but it is a sales tax here. That means a percentage (about 10% now) of the sale price. The buyer pays it on the price of the new car, and the buyer pays it on the price of the used car.
Whether you have a trade or not doesn't matter.
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Old 11-27-2011, 05:22 PM
 
Location: NJ
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In most states you pay tax on the net amount, not the gross. Here is a nice article that lists the states.

What Fees Should You Pay? - Edmunds.com
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Old 11-27-2011, 06:59 PM
 
422 posts, read 877,856 times
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Specifically, in California has someone dealt with this? The edmunds chart says they will hit me for tax on the $20,000. Just wondering. I have walked away from many deals when I felt like they were adding junk fees to the final price of the vehicle.
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Old 12-01-2011, 09:24 PM
 
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Many dealers will offer you a big dollar trade in to get you to come in and sign the papers and then and only then after you have decided you really want the car that the TRADE IN PRICE is being deducted from the regular list price of the car. A scam
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