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Tax question: Trading in old vehicle VS. Selling privately
Posted on 5/31/20 at 8:59 am
Posted on 5/31/20 at 8:59 am
I know you can get a tax break on your new purchase if you trade in your old one, but what if you sell privately? Anything you can report on your state tax return? I know I'd probably make more selling privately, but if I can't get a tax break then the numbers are a tad closer.
Anybody sell a car yourself recently? Seems like it may not be that hard. You should be able to do it mostly online. I'm sure it's a hassle weeding out all the non-serious inquiries and having to meet strangers that want test drives, but maybe that's worth a couple extra thousand.
Anybody sell a car yourself recently? Seems like it may not be that hard. You should be able to do it mostly online. I'm sure it's a hassle weeding out all the non-serious inquiries and having to meet strangers that want test drives, but maybe that's worth a couple extra thousand.
6
Posted on 5/31/20 at 9:33 am to Neauxla_Tiger
quote:
I'm sure it's a hassle weeding out all the non-serious inquiries and having to meet strangers that want test drives, but maybe that's worth a couple extra thousand.
This is the toughest part and is the real advantage of a Trade-In or CarMax. It’s even worse if the car is worth a lot more and will likely require financing.
I’m curious if the board has any ways to get the sales tax credit. It’s not a tax return thing since it usually doesn’t meet the sales tax threshold.
The only way “around it” is to convince the buyer to do the paperwork at the dealership you’re purchasing the new car from. They usually charge a small fee of $100 or so (similar to the notary you’d use anyway) to process it. When I did it, they called it an “In and Out Trade” or “Quick Trade”. You get the sales tax credit and the higher sales price of a private sale.
Posted on 5/31/20 at 9:42 am to LSUtigerME
quote:
When I did it, they called it an “In and Out Trade” or “Quick Trade”. You get the sales tax credit and the higher sales price of a private sale.
Interesting. Unfortunately I think I'm going to end up buying out of state for a better deal, so I'd have to convince my buyer to road trip with me
So that may not be for me. Any idea if my buyer needs financing how that would work? Would they just get a certified check from their lender to hand to me? ETA: I guess I'd have to coordinate sending the title to the lienholder too in that case.
This post was edited on 5/31/20 at 9:44 am
Posted on 5/31/20 at 10:34 am to Neauxla_Tiger
You also have to remember that if the buyer is financing there may be a limit to the amount he can finance. I am currently in the same boat. Bought a car out of state and decided it was just easier to trade.
Posted on 5/31/20 at 11:09 am to Neauxla_Tiger
Selling a used car privately has always been a better financial decision.
I buy and sell used cars for myself and my family every year. I have noticed a disturbing trend over the past 3 - 5 years.
People don’t have the cash to buy a car from a private party anymore unless it is cheap.
Over $20,000? You may as well be selling a Ferrari.
$10,000 - $20,000 You have a very limited buyer pool. People come look at the car, agree to price, but then can only get financing on 75% of the value and have no cash. (Waste of your time)
$5,000 - $10,000 You can do it but it will take a few weeks.
Less than $5,000 You will have 5 buyers before the end of the week.
I buy and sell used cars for myself and my family every year. I have noticed a disturbing trend over the past 3 - 5 years.
People don’t have the cash to buy a car from a private party anymore unless it is cheap.
Over $20,000? You may as well be selling a Ferrari.
$10,000 - $20,000 You have a very limited buyer pool. People come look at the car, agree to price, but then can only get financing on 75% of the value and have no cash. (Waste of your time)
$5,000 - $10,000 You can do it but it will take a few weeks.
Less than $5,000 You will have 5 buyers before the end of the week.
Posted on 5/31/20 at 12:31 pm to Neauxla_Tiger
quote:
Unfortunately I think I'm going to end up buying out of state for a better deal, so I'd have to convince my buyer to road trip with me
Have you bought out of state before? Do they register the car for you and charge you sales tax on it? I seem to recall when I was looking some didn’t and required you to register it yourself in your home state, at which point you’d pay the taxes on it.
So I’m not sure how that process would work and if you could do the “trade” with the buyer at that point.
I’m genuinely curious about this question because I’ve always touted trade-ins as an advantage since LA sales tax is so high. Your trade-in offer being 9-10% higher for the tax credit can often make up a lot of the difference between private party and trade-in.
Posted on 5/31/20 at 1:41 pm to LSUtigerME
I started another thread about a week ago asking that same question. Sounds like most out of state dealers will figure the right tax for you and get the plates and stuff mailed to you so you don't have to worry about it later.
I'm guesstimating the difference between the trade in (including the credit) and private sale would be between $2k-$3k. That's just based on seeing what other comparable make/model/year/mileage are listed for.
I'm guesstimating the difference between the trade in (including the credit) and private sale would be between $2k-$3k. That's just based on seeing what other comparable make/model/year/mileage are listed for.
Posted on 5/31/20 at 6:00 pm to Neauxla_Tiger
We need our legislators to change the law similar to what Arkansas has.
If you buy a new car in Ark and private sell your old car within 45 days, either before or after the new-car purchase date, you are entitled to a credit of the sales tax on the new car. There is a form to apply for it if you sell the old car after the new car deal closes.
We need something similar, but allow more like 60 or 90 days window.
The dealers get too much of an advantage with the current system, and they use it in negotiating trades. They can knock 10% off a fair trade price.
If you buy a new car in Ark and private sell your old car within 45 days, either before or after the new-car purchase date, you are entitled to a credit of the sales tax on the new car. There is a form to apply for it if you sell the old car after the new car deal closes.
We need something similar, but allow more like 60 or 90 days window.
The dealers get too much of an advantage with the current system, and they use it in negotiating trades. They can knock 10% off a fair trade price.
Posted on 5/31/20 at 8:21 pm to Neauxla_Tiger
I actually had success with showmethevin In BR recently. I think they have a trade in feature that would help with getting the tax break. Idk for sure though.
Posted on 6/1/20 at 12:13 am to Muice
My wife and I are having that argument now.We have a new car ordered and I want to just trade in the old car and she wants us to sell it ourselves.I’d rather get the break on sales tax and avoid the hassle of doing a private sale.I told her if she insists on selling it she can deal with it,I don’t want to be bothered.
Posted on 6/1/20 at 6:52 am to Neauxla_Tiger
quote:
I know you can get a tax break on your new purchase if you trade in your old one, but what if you sell privately?
You can do what is called an "in and out" and a dealership. If you have a buyer lined up for your car, you essentially trade it in to the dealer who turns around and sells it to the buyer at your trade in cost. This way you get the tax credit, but the dealer will charge their doc fee to the buyer ~$250 in LA. Dealer handles all the paperwork etc.
Posted on 6/1/20 at 9:25 am to LSUtigerME
quote:
Do they register the car for you and charge you sales tax on it? I seem to recall when I was looking some didn’t and required you to register it yourself in your home state, at which point you’d pay the taxes on it.
If you are coming from LA to buy in TX, the dealer will most likely be able to calculate and pay the tax for you. I have done 2 this way. Both times they calculated slightly off. They sent the plates to a local title place and you have to go cut a check for the shortage to get your plate.
Agree with above poster about the used market for individuals. If it's cheap, tons of buyers. But once you cross about $10k, it's really tough to find anyone. At that point, it's worth the sales tax and time savings to just trade in imo
Posted on 6/1/20 at 10:11 am to Neauxla_Tiger
quote:
I know you can get a tax break on your new purchase if you trade in your old one, but what if you sell privately?
Few people have mentioned doing an "in and out" which will work but that's no longer a true "private" transaction.
As far as income taxes, there usually is nothing to report because if it's a personal vehicle, you almost always sell it for less than you bought it for.
Posted on 6/1/20 at 12:57 pm to Twenty 49
quote:
We need our legislators to change the law similar to what Arkansas has.
If you buy a new car in Ark and private sell your old car within 45 days, either before or after the new-car purchase date, you are entitled to a credit of the sales tax on the new car. There is a form to apply for it if you sell the old car after the new car deal closes.
We need something similar, but allow more like 60 or 90 days window.
This makes way too much sense for our tax and spend governor to allow that.
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