JSBJohn

Hey guys, I found a guy willing to trade his 2009 CTS-V for my Procharged C6. I've changed jobs and 4 doors has become a must have.

So here's the deal - His 2009 CTS-V with 50,000 miles is worth about $38,000 KBB. My C6 with it's options is worth about $32,000 KBB. We are planning to make a straight across trade since my car has quite a few expensive modifications that he likes i.e. the P1SC Procharger unit.

Notable facts:
-We both still owe money on our cars, titles are held by our banks.
-He lives in Oklahoma where his car is registered.
-I live in Texas where my car is registered.
-He is plannig on getting a loan to pay of what I owe on my car.
-I will in turn get a loan after he does equal to the amount he payed off my car with for his car and pay off what he still owes.

Now if we both held our own titles, I believe we could make a bill of sales stating the trades were of equal value and tax would not have to be paid. Or worst case scenario his car is worth a little more than mine KBB and I might have to pay a portion of the tax.

BUT- Since we both have to pull loans to pay off each other's loans, I assume it will be considered a sale for both of use and we may both get nailed with ~$2500-$3000 in taxes.... Is this a correct assumption?

What advice can you guys provide to me so that I can get this trade worked out? How can we avoid being taxed? Is there a better way to make this trade? Maybe we can get loans, pay off cars, hold our own titles, and then gift them to each other (still might be taxed anyways) or declare a straight across trade like I mentioned?

Side note rant: It's complete bullsh@t that the state taxes used car sales like this, one car can be taxed many many times during it's life on the road as it goes from owner to owner. For example, a car worth $20,000 can be taxed up to $2000 several times, and before you know it the state collects $10,000 in taxes for a car worth $20,000...

Any help/advice is greatly appreciated.

flange

About two hundred and fifty years ago, a bunch of guys waged a war over double taxation......

EyeMaster

Every transactions you ever make, should be taxed in most states / Canada. When you sell your dinner table to your friend, in theory you're suposed to declare the sale and file for taxes. Nobody does, but since your car is registered, that's why the gov gets it.

Now, for advice. You should both make your own loans for your own car right now and clear the titles, then trade cars. I don't recommend doing a loan for the other person's car.

Steve_R

Dunno about TX and OK, but that's not true here in CO. If you trade vehicles here there is a form from the DMV to fill out so that there is no sales tax if the cars are of equal value. Doesn't and shouldn't matter if there are loans on them or not.

JSBJohn

No kidding, they were pissed off about taxation on their tea and crumpets... I think it's about time for another to be waged...

JSBJohn

Advice seems pretty solid, but when I get a loan to pay off my car, it will need to be approximately $20,000. Not sure I can just pull out a $20,000 loan without the car title being the collateral, can I?

LS WON

JSBJohn

See, thing is, if you trade your car in at a dealership, the amount of tax you paid on your vehicle when you originally bought it is deducted from the amount of tax you need to pay on registering the new vehicle. Shouldn't that be the same in this situation??

2012Z06

One thing you can do is take out a loan on your house for home improvements. You then switch the collateral to your house and own the car outright. I did this before and it worked out well for me.

TLS_Addict

I believe when trading a vehicle in you only pay tax on the difference.

New car = $50,000
Your trade = $35,000
Tax is based on $15,000.

JSBJohn

I know this is true about trading in to a dealership, I suppose it could also apply to this trade. They will value my car at around $32,000 and his at $38,000 though, they won't count the cost of the supercharger I don't believe. Maybe in the bill of sales I can say my car was valued at the $38,000 his car was also valued at in the trade, and maybe that will work.

383LPE

can you find a mutualy liked dealer and run the trans through them? They would take both cars in and sell both cars, also provide financing if needed. I have done an in/out like this through a friend that had a dealership and they wanted like 600 to cover costs.

anyway, just an idea.

JSBJohn

This may also be a possibility. I will look into that, thanks!

TLS_Addict

With a trade and no extra money being shelled out you should be able to get out of any tax.

Joe_Planet

wow this is a serious headache lol

GrayC5

No, it does NOT work this way in Oklahoma and "the purchase price may not include a deduction for any traded in vehicle." See following link:

Oklahoma Motor Vehicle: Excise Tax

I would suggest that each of you speak to someone in your respective state's motor vehicle taxing authority. There may be something in your state's laws that others here and I are not aware of. Good luck.

EyeMaster

That's for you, your bank and financial adviser to figure out. If you have a house, things get way easier.