Finding a good deal is all about competition. Prices go down when multiple companies sell the same thing. Whether it’s 
Trade-in tax calculation
When you get a lower than expected trade-in appraisal at the dealership, it can be tempting to stop negotiations. You may believe you could get a better offer somewhere else. While this may be true, you must remember to factor in tax savings to perform a true comparison.
Most states will credit the value of your trade-in when determining the purchase price for sales tax calculations. This can result in a nice discount off the total amount you’ll pay. If you were to sell your car independently, you would not be able to take advantage of this savings.
Remember this trade-in formula:
trade in value times 6%* = tax savings
*Sales tax varies from state to state, so use your own state’s tax %, but 6% is the norm.
For Example
If you were to buy a $25,000 car and had a trade-in worth $15,000, your sales tax would be on $10,000 instead of the full $25,000. If your tax rate is 6%, that would result in a savings of $900. If your appraisal is up to $900 less than what you could get independently, you’re still better off selling to the dealer. And of course it’s less of a hassle as well.
$15,000 X .06 = $900
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Why is it free? Because buying a car is something almost everyone has to do and I strongly believe the process is designed to confuse and take advantage of consumers. I'd like to level the playing field and give everyone a chance at a fair deal.
That’s a good tip, and I’m sure that most people never thought of that – I know I didn’t!
Hmmm…my husband has been pestering me to think about trading in our Element for another car in the next year. (I’d really like to hold on to it for a while longer.) However, he’s been reading that you don’t offer up the trade-in until the paperwork has been finalized. Somehow, you end up with a better deal if you negotiate a lower price to start, then throw in the trade-in at the end. I’m not sure how that factors into the tax equation.
@LittleHouse Your husband is right, never discuss trade-in (or financing) until after a car price has been agreed upon. You don’t need to finalize paperwork until the very end though. Since you’re making the trade-in independent from the car price, you can use this equation to determine whether you want to sell to the dealership or sell third party and the tax implication should not impact the already settled purchase price of the car.
When/if you decide to replace your Element, shoot me an email if you or your husband want to talk during the process. I’d be happy to help.
Hello,
I am looking to trade in my lease early but will be buying my next car, can I use my leased vehicle as a trade in to get a sales tax savings on the next car?
IE. Lease is worth $10,000 and I am not upside down just even on it and new car will be $20,000 do I pay sales tax on the $10,000 or the $20,000? I live in Arizona.