Trade in Values tanking

[Mmaengine]

Wait! Are you trying to tell me that I can’t retire off the sale of my 392 wrangler? I was told that prices can only go up never go down. I was flamed here hard for even suggesting that prices will drop.
Interesting that another conspiracy theory turns into reality once again.

Hang on to that 392. It’s going to be a collectible when they outlaw gasoline in 6 months.

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[Ratbert]

They will attempt to sell it for more than its original MSRP. Always best to sell your trade in yourself.

Always? For some people (in some states) you're significantly better off trading in due to how the taxes work.

 

[SoK66]

Always? For some people (in some states) you're significantly better off trading in due to how the taxes work.

That would be rare in most cases. Could you cite a State where the tax (?) would make trading in preferable? Sales taxes are paid by the buyer.

 

[Ratbert]

That would be rare in most cases. Could you cite a State where the tax (?) would make trading in preferable? Sales taxes are paid by the buyer.

I'm pretty sure you pay sales tax on the difference in most states.

For example, buying a $50,000 vehicle and you're getting $40,000 for your trade-in with 8% sales tax. You're paying $800 in sales tax if you trade it in versus $4,000 if you sell it elsewhere.

 

[Ratbert]

Too bad used car prices haven't started to come down yet.

Yeah, and if used car prices were starting to come down we'd have people creating threads with titles like "Trade in Values tanking", right? That, obviously, would really suck

 

[LuvHydro]

I'm pretty sure you pay sales tax on the difference in most states.

For example, buying a $50,000 vehicle and you're getting $40,000 for your trade-in with 8% sales tax. You're paying $800 in sales tax if you trade it in versus $4,000 if you sell it elsewhere.

This is correct in our state. Selling to CarMax, Carvana, etc offset it also.

 

[SoK66]

I'm pretty sure you pay sales tax on the difference in most states.

For example, buying a $50,000 vehicle and you're getting $40,000 for your trade-in with 8% sales tax. You're paying $800 in sales tax if you trade it in versus $4,000 if you sell it elsewhere.

In any State I’ve lived in you pay sales tax on the MSRP of the vehicle being purchased, not the net difference between MSRP and the trade. Whether you pay cash or trade in the sales tax is the same.

 

[Ratbert]

In any State I’ve lived in you pay sales tax on the MSRP of the vehicle being purchased, not the net difference between MSRP and the trade. Whether you pay cash or trade in the sales tax is the same.

It looks like you're in Colorado. From Sale & Use Tax Topics: Motor Vehicles - Colorado tax https://tax.colorado.gov/sites/tax/files/documents/SUTT_Motor_Vehicles_November_2021.pdf:

If the purchaser trades in a motor vehicle they own as part of a transaction to purchase another motor vehicle, the fair market value of the trade-in is excluded from the taxable purchase price, so long as the motor vehicle the purchaser trades in is subject to licensing, registration, or certification.

It's not necessarily true that you're always better off selling it yourself.

 

[SoK66]

It looks like you're in Colorado. From Sale & Use Tax Topics: Motor Vehicles - Colorado tax https://tax.colorado.gov/sites/tax/files/documents/SUTT_Motor_Vehicles_November_2021.pdf:



It's not necessarily true that you're always better off selling it yourself.

The problem is, no dealer is going to give you that $40k on a trade, even if you just took it off the lot the day before and the sticker is still in the window. No dealer would give you "fair market value" on a trade, they'll usually give you the "loan value" or less, and any discount, rebate, etc. you get off MSRP doesn't count when taxes are calculated, here or any other State I know of. There's no financial guide I've ever read that says you're better off trading in vs selling your car yourself, the gap in actual sales tax cash vs trade is quite small.

When I worked in retail sales the F&L people did everything to dissuade a customer from making a cash buy. Dealer grosses depend upon lowballed trades, high grossed new vehicles, F&I and accessory sales. Read up on four square deals:

https://www.consumerreports.org/con...ff-with-the-four-square-heres-how-to-beat-it/

 

[Ratbert]

The problem is, no dealer is going to give you that $40k on a trade, even if you just took it off the lot the day before and the sticker is still in the window. No dealer would give you "fair market value" on a trade, they'll usually give you the "loan value" or less, and any discount, rebate, etc. you get off MSRP doesn't count when taxes are calculated, here or any other State I know of. There's no financial guide I've ever read that says you're better off trading in vs selling your car yourself, the gap in actual sales tax cash vs trade is quite small.

When I worked in retail sales the F&L people did everything to dissuade a customer from making a cash buy. Dealer grosses depend upon lowballed trades, high grossed new vehicles, F&I and accessory sales. Read up on four square deals:

https://www.consumerreports.org/con...ff-with-the-four-square-heres-how-to-beat-it/

Absolutely, but hopefully you realize that with what you said earlier (posted below) you were leaving out a big chunk of that equation, especially when buying a less expensive vehicle or when used car values are stupidly overinflated.

In any State I’ve lived in you pay sales tax on the MSRP of the vehicle being purchased, not the net difference between MSRP and the trade. Whether you pay cash or trade in the sales tax is the same.

 

[TheRaven]

I'm pretty sure you pay sales tax on the difference in most states.

For example, buying a $50,000 vehicle and you're getting $40,000 for your trade-in with 8% sales tax. You're paying $800 in sales tax if you trade it in versus $4,000 if you sell it elsewhere.

While it is true that many states have this rule where you only pay sales tax on the difference between trade and the new purchase, it doesn't generally make trading in the better option. The reason for that is that the difference between trade-in value and private party sale value is almost always more than the tax savings.

Example - I unloaded my 2020 Challenger 392 last September for a more sensible sedan. KBB trade-in value was pegged at about 41k and the car I was looking to buy retailed in the $32-34k range. So if I could trade in the Challenger I would pay NO tax whatsoever. Problem is that that was really only about $2200 in savings. The best trade-in offer I got, after trying at numerous dealers that had the car I was looking for, was $38k. I ended up selling the Challenger to Vroom for $42k. So I got about $1800 more by NOT trading in my Challenger. Vroom turned around and sold the Challenger three days after listing it for $51k. I could have gotten $45-46k had I listed it myself. Side note - I actually paid $35 OTD for that Challenger in late 2020. Insanity.

 

[LuvHydro]

While it is true that many states have this rule where you only pay sales tax on the difference between trade and the new purchase, it doesn't generally make trading in the better option. The reason for that is that the difference between trade-in value and private party sale value is almost always more than the tax savings.

As a general rule, you speak the truth, in as far as strictly dollars.

For me, selling two vehicles to Carvana was the perfect solution. At the time they paid me way over what KBB claimed was dealer retail for both units.

My Carvana transactions were seamless and basically perfect and I never had to leave my couch until I met Carvana to drop of my vehicles.

Sadly those times are gone and as we return to normal, the struggle of disposing of your current vehicle will return.

 

[chicknwaffles]

Always? For some people (in some states) you're significantly better off trading in due to how the taxes work.

if you don't get screwed by the dealer. a tax break is not the only consideration, just a piece of the puzzle.

sometimes trading is more advantageous than selling private. sometimes not.

 

[Ratbert]

While it is true that many states have this rule where you only pay sales tax on the difference between trade and the new purchase, it doesn't generally make trading in the better option. The reason for that is that the difference between trade-in value and private party sale value is almost always more than the tax savings.

Example - I unloaded my 2020 Challenger 392 last September for a more sensible sedan. KBB trade-in value was pegged at about 41k and the car I was looking to buy retailed in the $32-34k range. So if I could trade in the Challenger I would pay NO tax whatsoever. Problem is that that was really only about $2200 in savings. The best trade-in offer I got, after trying at numerous dealers that had the car I was looking for, was $38k. I ended up selling the Challenger to Vroom for $42k. So I got about $1800 more by NOT trading in my Challenger. Vroom turned around and sold the Challenger three days after listing it for $51k. I could have gotten $45-46k had I listed it myself. Side note - I actually paid $35 OTD for that Challenger in late 2020. Insanity.

Understood. There are some people here, however, that were saying that it's always better to sell it yourself. And, of course, not realizing that there can be tax savings by considering alternatives.

 

[chicknwaffles]

Understood. There are some people here, however, that were saying that it's always better to sell it yourself. And, of course, not realizing that there can be tax savings by considering alternatives.

I did that not too long ago. the price the dealer gave me plus the tax incentive was close enough to the price I was asking privately. Wasn't much point trying to sell it privately and go through that probable bs and tire kickers.

it is not always better to do either. Each circumstance and situation is different.

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