Question about sales tax

[Mrmike]

I thought I would try Carvana, Carmax or Vroom to see where I could get the most money for my trade in. I assumed it would probably be higher than what the dealer would offer me. While talking to a friend I was told something I didn't know. He said if I trade in with the dealer, I only pay taxes on the difference between the cost of the new vehicle and the trade-in. If I sell to Carvana etc., I will have to pay taxes on the full price of the new vehicle. That tax savings might offset the difference between the two figures. I live in New York State. Does anyone know if this is true. If so, I have to re-think trading vs. selling outright.

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[magicbus]

Absolutely true here In Massachusetts and New Jersey where I used to live.

 

[Suzysparks]

I thought I would try Carvana, Carmax or Vroom to see where I could get the most money for my trade in. I assumed it would probably be higher than what the dealer would offer me. While talking to a friend I was told something I didn't know. He said if I trade in with the dealer, I only pay taxes on the difference between the cost of the new vehicle and the trade-in. If I sell to Carvana etc., I will have to pay taxes on the full price of the new vehicle. That tax savings might offset the difference between the two figures. I live in New York State. Does anyone know if this is true. If so, I have to re-think trading vs. selling outright.

I believe different states have different rules, but in Texas that is absolutely the case. You can do the math. The amount the dealer is giving, while maybe less, will be offset because of the tax savings.

 

[IdahoDirtFarmer]

That's how it works in Idaho as well.

 

[Blue oval fan]

Yeah but carvana was $3k higher then the dealer so not worth the tax savings.

 

[RPYLE50]

I would check with your state. In Missouri, the sales tax you pay is the difference between the price of the car(s) you sold versus the price you paid for a new one regardless if you trade it to the dealership or sale private party. I would sell to whoever can give you the best price for your car to reduce your tax liability IMO.

 

[Mark S.]

In IL you can take up to $10K of the value of your trade in off the new-car sales tax bill.

 

[Bill G]

It’s true here in CA too, but you do have to do the math. Carmax gave me $3000 over trade-in which more than offset sales tax difference.

 

[PaulOinMA]

I traded in my 2001 VW GTI GLX when I bought a CPO 2003 Audi A4 Avant 3.0q. Salesman said the trade-in comes off the purchase cost, and I save on sales tax. Never knew that.

 

[Pigpen]

True in Tennessee. CarMax offered me more for my 2017 Escape with 17k miles than Ford offered, but my cost was less trading it in due to the sales tax difference.

 

[Escape2Bronco]

I thought I would try Carvana, Carmax or Vroom to see where I could get the most money for my trade in. I assumed it would probably be higher than what the dealer would offer me. While talking to a friend I was told something I didn't know. He said if I trade in with the dealer, I only pay taxes on the difference between the cost of the new vehicle and the trade-in. If I sell to Carvana etc., I will have to pay taxes on the full price of the new vehicle. That tax savings might offset the difference between the two figures. I live in New York State. Does anyone know if this is true. If so, I have to re-think trading vs. selling outright.

True in most states even when buying out of state. You pay the taxes on the total purchase amount based on your state tax rate. Trading your vehicle in drops the overall purchase amount.

 

[Jill]

I thought I would try Carvana, Carmax or Vroom to see where I could get the most money for my trade in. I assumed it would probably be higher than what the dealer would offer me. While talking to a friend I was told something I didn't know. He said if I trade in with the dealer, I only pay taxes on the difference between the cost of the new vehicle and the trade-in. If I sell to Carvana etc., I will have to pay taxes on the full price of the new vehicle. That tax savings might offset the difference between the two figures. I live in New York State. Does anyone know if this is true. If so, I have to re-think trading vs. selling outright.

True in Ontario.

 

[Outback Texan]

Yes... true here in Texas. However I still came out ahead when I sold my 2017 Golf GTi to Carmax and bought my Badlands from a local dealer. I came out ahead by about $1800. You just have to get a Carmax estimate then run the numbers. Good luck.

 

[Caliope]

In IL you can take up to $10K of the value of your trade in off the new-car sales tax bill.

As of 1/1/22, the tax rules changed in IL. You now get to exclude the full trade in value from the sales tax bill. That was how it used to be until our illustrious governor Pritzker changed things to raise more sales tax revenue from the rich at the expense of the middleclass.

 

[Mark S.]

As of 1/1/22, the tax rules changed in IL. You now get to exclude the full trade in value from the sales tax bill. That was how it used to be until our illustrious governor Pritzker changed things to raise more sales tax revenue from the rich at the expense of the middleclass.

Well, that's nice to know; it changed right after I bought the Badlands in Nov '21. Dang...

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