ryanc44

Okay, I've never bought a car through a dealership, so bear with me folks.

I'm in Los Angeles, and I just realized that if I buy in Ventura county (7.25%) instead of LA county (8.25%) I would save approximately $250 on sales tax if I were to pay MSRP for a TSX.

Then I started to think about how a trade-in affects this. I currently own a CL and I'm thinking that trading that in would bring the purchase price of the TSX down to say $15000, which would drop sales tax about $950- assuming that's how it all works with a trade in?

Since this makes obvious sense to me I can't imagine this is how it actually works...

provench

Well - I can say that in NC ... you pay sales tax on the difference in prices ... so a $25K car with $10K trade in ... you pay tax on $15K. So this can make a big difference for sure. This is something a lot of folks forget about when selling a car privately. You have to make sure you get at LEAST what the sales tax difference is more on the private sale or it is not worth it (in addition to the time taken to work the private sale).

justinjsw

First it doesn't matter where the car is purchased, DMV fees are based off your home address. so if you buy in LA county but live in OC the DMV fees are collected based off OC rates.

Second in cali you pay sales tax based on the selling price of the car. Trade ins will not affect the amount of sales tax.

provench

That's the shaft (x2 if you count the sales tax rate )

ryanc44

justinjsw said:
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First it doesn't matter where the car is purchased, DMV fees are based off your home address. so if you buy in LA county but live in OC the DMV fees are collected based off OC rates.
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When you say "DMV fees", are you referring to the VLF and sales tax together? That sucks if there's no sales tax advantage to buying a car out of county...


justinjsw said:
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Second in cali you pay sales tax based on the selling price of the car. Trade ins will not affect the amount of sales tax.
----

This sucks even worse- So a TSX is $27000, you trade-in your car to the dealership for $10000, then why isn't the "selling price" of the car now $17000? Is it that the trade is considered part of the payment and not a reducing factor of the sticker price? Man, those guys up in Sacramento sure know how to stick it to us...

larchmont

If what Justin said is right -- and why wouldn't it be? -- it seems like the California situation is unusual. Here in NY, it's the same as what Provench said for NC -- you pay sales tax only on the DIFFERENCE between the price of the new car and the trade-in value of your old car.

This helped me out a lot. I realized that I might have gotten as much as maybe $2000 to $3000 more for my "old" car (an '03 TL-S) if I sold it privately, but taking into account how much I saved on sales tax by just trading it in, there would have been little actual gain for me to go through the hassle of a private sale. I considered myself very fortunate -- I hadn't expected it to work this way.

Count Blah

Yeah, in FL you only pay sales tax on the difference. That CA law seems like it would encourage some fudging of the numbers. Like the dealer could sell the TSX for $22,000 provided you sell him your trade for just $5,000. Your net payment is still just $17k, but you've saved paying taxes on that $5k difference. That seems like why the FL (and NY, etc.) laws are as they are.

Nachoman

Anybody from CA drive across state lines because of this? For instance driving to Nevada or Arizona to avoid paying an extra 500-1000 dollars in taxes? Could this also be a way for dealers to weasle more money out of the deal, claiming to have to charge tax on just the car price and then just pocketing the difference? I'm definitely not accusing any dealers on this board of doing that but I can see unsavory dealers in other states of pulling that scam.

shaf

I'm pretty sure that if you live in CA and buy a car out-of-state, you still have to pay CA sales tax when you go to register the car. In most situations across the country, you pay sales tax for the state you live in, no matter where you buy the car.

dabuda

I had the same questions when I got my tsx. the acura salesguy told me I pay sales tax where I register the car not where I purchased it.

also pulled this from www.dmv.ca.gov:
What should a California resident look for when buying a new vehicle from another state?
California residents are prohibited from importing, purchasing, or leasing a new vehicle from another state, unless the vehicle was manufactured for sale in California and the Environmental Protection Agency label certifies the vehicle has California smog equipment. California considers a new vehicle to be any vehicle with less than 7,500 miles on the odometer at the time it is purchased or aquired.

a way around this is have someone out-of-state register it and when it reaches 7,501 miles register it in CA. dont even know if this is possible or worth it...sounds like a pain

Nachoman

Has anybody asked a dealer to take off more $$ from the purchase price and correspondingly reduce the value of the trade in so that they pay less taxes? While I can't see them writing the whole trade in value off the purchase prices, especially if you have a high value trade in, but even shaving a couple thousand off purchase price saves you a couple hundred bucks.

kurt_bradley

Whether you adjust the ACV of a trade-in or you decrease the selling price of the car, you still pay sales tax only on the difference of the 2 cars. So it won't matter if they adjust one of the numbers if the difference is still the same. You'll still pay the same sales tax on the balance of your car's selling price minus the ACV of your trade. It is nice that you don't have to pay sales tax twice though.

Nachoman

According to justinjsw's earlier post, in CA you pay the sales tax on the total price of the vehicle and then deduct the trade in off of that. I have no idea if that is true or not but I assume he would know. Seems crappy that CA would be one of the few states that do this. In this case, taking more off the new car price and lowering the trade in value would lower the taxes you have to pay. I just wonder if dealers are willing to do this workaround for you.

justinjsw

Thats the way the great state of California wants it done so what can a dealer do about it. Again, if you live in California it doesn't matter where the car is purchased the DMV fees are collected based off the rates from your home address. Even if you purchased this car out of state, there is no bearing because when you go register this car with California DMV you are still going to have to paid the fees.

Trade ins have no bearing on how much taxes you going to pay for the new car. Example...30K car plus tax/lic minus down payment or trade in value. Its not 30K car minus down payment or trade in value plus tax/lic on the difference. Maybe in the other states but not for california. Wait till Oct 1st when the DMV fees go up by 2.5 times of what it is now. If the DMV fees are 300.00 OCt 1st. it will be 800.00.

justinjsw

What are you trying to say? I do not uderstand your statement.

Why would it matter what the trade in value is, if it has no bearing on the taxes paid for the new car. Rather your trade is worth 1K or 10K it doesn't matter because if the new car you are buying is 30K the taxes collected is for a 30K car not 29K or 20K.

Nachoman

What I am talking about is if you agree on buying 25k car with a 10k trade in, can the dealer agree to word the contract such that it is now a 21k car and 6k trade in? In this case the buyer is paying less tax on the total transaction. I assume the tax is taken from the agreed upon price of the car and not the MSRP of the car. Basically the dealer still gets the same amount of money, it saves the consumer from some of the tax hit.

justinjsw

Lets ask this question if the TSX is 27K and you put down a 10K downpayment via a check...is the TSX now a 17K car? No its still a 27K car. In California a trade in is considered a cash equity. A down payment so to speak.

justinjsw

No of course it can't be done. Dealers are licensed by the State of California. We have to collect the right amount owe to the state. When the audit is done each quarter by the State there will be hell to paid if the numbers don't match. First offense 15K fine...second offense you lose your license.

larchmont

Justin, I think you're missing what they're saying. According to what they are suggesting, there wouldn't be any problem of the numbers not "matching."

Let me take a swing at it.

Let's say I'm buying a TSX, for which you really want to charge me $27K, and I'm trading in an Accord, which ordinarily would have a trade-in value of $10K. If we did the deal at those numbers, I'd be paying tax on $27K. But suppose, under the circumstances, you decide to sell me the TSX for $24K (which could never be proven to be any kind of offense, because it's not an irrational price), and give me only $7K for the Accord. It comes out exactly the same for you and for me, except that now I'm paying tax on only $24K.

What people are asking is: Is this sometimes/often done as a way of giving the buyer a break on the tax?

P.S. Nachoman (above) gave a similar example.

justinjsw

No it can not be done. I don't remember the code under the california state tax rules but bascially its an abuse of the vehicle sales tax law...if the dealer gets caught...its an automatic loss of our license.

JR8

Don't forget the registration fee tripples for California drivers come October!!

ryanc44

Thanks for the clarification on our whack system here in Cali Justin.

As I said, I've never purchased through a dealership- I've had the luxury of being able to do direct purchases through American Honda, so I never bothered to understand the DMV fees as I was getting such a killer deal on the vehicle price itself.

I've also always private party sold my older vehicles- thought maybe there'd be an extra trade benefit in regards to the sales tax, but I guess not.

Curious- can you confirm what the VLF on the TSX will be in October? Everyone keeps saying the fees will triple, but the DMV website says the VLF is going from 1% to 2% value of the car.

Regards,
Ryan

duugk

Ryan, You are not going to get what the CL is worth from the dealer. I just sold my CL on Autotrader.com and got about 2K more than the dealer would have given me, plus, the guy that bought it from me got it for about 2k less than if he bought it off the used car lot, so....we both walked away happy.
Now I don't have to get screwed on the trade as well as the sale. The down side is that he gets no warrantee but, we both figure that there are very few things on the car that would be more than 2k to fix. I figured, why not give a kid a good deal instead of some dealer. Now when I go to pay for the new TSX, there is no doubt in my mind about what I really paid for the car and how "good" of a deal I got. Some dealers will try to make you think you got a great deal with lots off MSRP while screwing you on your trade in, don't let it happen to you.

ryanc44

I agree duukg.

I've decided to go the private party route to sell my vehicle. I've done it in the past and even for the little bit of extra work, it can be worth it.

I just found out that my friend's mom is interested in my CL, so I can cut her a good deal and still get more than the dealer would've given me.

Just one less headache for the negotiation process...

Thanks,
Ryan C.