When to add tax?

When buying new vehicle when should the tax be added in?
1. Vehicle Price
2. Tax
3. Trade-in
4. Down payment

OR
1. Vehicle Price
2. Trade-in
3. Down payment
4. Tax

Thanks

 

The purchase agreement (receipt, if you will) with my current car listed the
items in this order. This was 5 years ago and applies to cars purchased in
Canada. So I don't know if it is the same in other countries.

1. Vehicle price
2. Trade-in
3. Provincial sales tax on total vehicle price less trade-in
4. Federal sales tax (GST) on total vehicle price (trade-in does not apply)
5. Down payment

 

I would have to believe that it's your first option. Think of your
trade in as a cash payment towards the total cost of the car you are
going to purchase.

Nick

 

(QUAKEnSHAKE) wrote in :

Wher are you located? In the province of Ontario in Canada the tax is added
AFTER the trade-in's value has been removed from the purchase price. Other
jurisdictions calculate tax BEFORE the trade-in's value has been removed
from the purchase price.

In all areas I know of, the tax is calculated BEFORE you pay the
downpayment. If it were any other way, you could buy your car outright with
cash and pay no tax at all.

 

In the U.S.A.,
1. Vehicle Price
2. -trade-in
3. +accessories
4. +Tax
5. -Trade-in
6. = money to be given to dealer

 

Oops, I had Trade-In 2x...

In the U.S.A.,
1. Vehicle Price
2. -trade-in
3. +accessories
4. +Tax
5. -down payment
6. = money to be given to dealer (from other source, i.e. loan provider)

 

So a trade of equal value generates NO tax?

 

In my experience, yes.

In fact, MANY years ago (1990) I had a change of careers and locale so I
went to trade in my '89 Volvo 76-GLE for a '90 Jeep Wrangler (moved to
Hoboken and was commuting to the city quite often) and I paid no tax on the
transaction. In fact, I even got money back as the trade-in vehicle was
worth more than the new vehicle.

Remember, tax has already been paid (by the car owner) on the vehicle being
traded in. Just like with your personal taxes. You don't pay income tax on
the total amount you earned, but rather the difference between what you
earned and appropriate deductions.

 

In my state, trade in is subtracted before sales tax is calculated.

 

See my other post about a minute after the one you responded to. This one
is obviously in error as I listed trade-in 2x.

 

Can we get some dealership to confirm this in the states? I find it
hard to believe that this is the case. If you do it this way, you are
essentially ripping the state off of tax money. How could a trade in
be considered as a discount to the value of a brand new vehicle?

Nick

 

As someone who has bought many cars in the U.S.A. I can confirm this. You
are not ripping them off of tax revenue as you have already paid sales tax
on the vehicle that is being used to discount the purchase price of the
new/newer vehicle.

Remember, tax has already been paid (by the car owner) on the vehicle being
traded in. Just like with your personal taxes. You don't pay income tax on
the total amount you earned, but rather the difference between what you
earned and appropriate deductions.

 

No, sales taxes are calculated according to the taxing authority's
rules, i.e., in NY State, sales tax is calculated per NY State's rules -
no rip off involved. Keep in mind the sales tax has already been paid on
the trade in.

 

Hi. First off I live in Illinois. I see there was some disagreement in
this discussion here on when the tax is added. Although I have bought 3
new vehicles ,in IL, I never really thought about this and dont recall
what order. This time around while I was doing some figuring it dawned
on me that it makes a difference. So have we come the the conclusion
that its :
1. Vehicle price
2. Trade-in
3. Tax
4. Down-payment
Thanks again for the help.

 

In Ontario Canada, the dealers fought very hard for this very thing and the
province agreed to it.

The dealers claimed they were losing sales to "curbsiders" (ordinary
people, not licensed dealers), who were supposedly robbing the dealers
because they did not have the same regulatory hurdles or overhead, and were
able to sell used cars cheaper because of that.

By removing the trade-in value BEFORE tax was calculated on the purchase
price, they enabled the dealers to tell prospective buyers that there was a
substantial financial benefit to giving the dealer your old car instead of
selling it privately.

It amounts to a tax subsidy for licensed dealers. And of course, YOU as the
consumer, pay any and all taxes levied in any country...

The practical effect of the tax change has been threefold:
1) The private used car market in Ontario for recent models has dried up
almost completely
2) Used cars now cost substantially more than they did before
3) I hate dealers even more now that I did before.

 

Depends on your location. I'm in NY and recently bought a new car. We paid
tax on the full price of the car. There were cash back incentives on the car,
and we had to pay tax on those too.

 

In my state, the tax is calculated on the MSR or some state derivative
of that, regardless of what kind of deal you make or what you trade or
don't trade.

 

That does apply in some states, but certainly not Calif. Its purchase price
+ accessories and options with tax added.

 

You didn't specify when the trade-in is computed. Of the items you /did/
list, that's the same all over.