Question on a Trade In
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Pro
Joined: May 2000
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From: Thonotosassa Florida
Question on a Trade In
Whenever you do a trade on another car I am trying to understand how it can offset the sales tax. Suppose I was to purchase a car for $30K. Instead of paying, say 7% of the purchase price of $30K, which would be about $2100, how would a trade in of $10K with a loan still on the car for about $2000, would that mean my taxes would be based on $8000 less for taxes or would it be $10K less for taxes? Not sure how the loan still outstanding on the trade in would be calculated to offset the taxes on the purchased car?
Melting Slicks
Joined: Jun 2003
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From: Yuma CO
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When making a purchase such as you are describing, the only thing that can be taxed, in terms of sales tax, is new money changing hands. Transfer of outstanding balances owed is not new money changing hands. You have already paid sales tax on that money so it cannot be assessed again, it is simply transferred to the balance owed on your new loan.
So, to answer your question, it would still be 10,000 less for taxes. However the 2,000 would transfer to the balance owed on your new loan.
DSTURBD
So, to answer your question, it would still be 10,000 less for taxes. However the 2,000 would transfer to the balance owed on your new loan.
DSTURBD
Last edited by DSTURBD; Aug 16, 2012 at 11:58 AM.
Thread Starter
Pro
Joined: May 2000
Posts: 619
Likes: 9
From: Thonotosassa Florida
When making a purchase such as you are describing, the only thing that can be taxed, in terms of sales tax, is new money changing hands. Transfer of outstanding balances owed is not new money changing hands. You have already paid sales tax on that money so it cannot be assessed again, it is simply transferred to the balance owed on your new loan.
So, to answer your question, it would still be 10,000 less for taxes. However the 2,000 would transfer to the balance owed on your new loan.
DSTURBD
So, to answer your question, it would still be 10,000 less for taxes. However the 2,000 would transfer to the balance owed on your new loan.
DSTURBD
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Not sure how it works in your state, but here in Missouri the value you get as a trade in is reduced from the amount you pay taxes on. Same thing goes if you private sell a car (either before or after your purchase) within 6 months (I believe).
