a question about tax...
 

say you can buy the car for msrp and it comes to 25,000 exactly. your state tax is 8% which comes to 2000 in tax. does that mean you actually end up paying 27,000? this car really becomes a little less attractive at 27,000 out of pocket. am i thinking about this correctly or does tax work differently on cars?

That's correct, but it some states, you can offset the trade-in value of your old car. So, if your trade-in is worth $10,000, then you're paying tax on only $15,000 of the new car. Somewhere there is a thread that says which states do that.

25000
+ dealer fees say 500
so 25500 x.08 so 2040 in tax

my dealership has msrp listed as 24,200 and destination listed as 730. so 24,930 should be the total cost of the car.

it would be nice if the tax only applied to what you are financing, does anyone know what states that applies to?

does that count towards your down payment as well or only what your trade in is worth? say my trade in is 10,000 and i put 5,000 down on top. do i only pay tax on the 10,000 i would finance?

what states is this how its done?

Any $25K car you purchase is going to have the same tax on it, so I'm not sure I understand your point. If you are looking for an OTD price of $25K then you have to start looking at $20K cars.

Considering sales tax is on everything you buy, this shouldn't be a surprise...

But as above, in many states you can reduce or eliminate your tax if you're trading in a car.

how can i find out what states give you a break when you trade in?

No, just the trade-in. Look for your state in the chart:

http://www.edmunds.com/car-buying/wh...d-you-pay.html

Thanks for posting that. Many people don't know about the tax/trade-in. In my case, it made a big enough difference that it made no sense to try and sell the car private party, and a dealer trade in made more sense.

The chart is a little out of date as I know in my state (Minnesota) the dealer doc fee is higher than $50 now (I believe it is $79). I wish all states put a cap on how much these dealers can charge for doc fees. Some dealers are getting away with $500-800 in doc fee charges which is a total joke.

ok luckily my state is listed as discounting the tax from the trade in. my car is kelly blue book at around 13k now, so say i wait another year to purchase i'd say 10k from the dealer is a safe estimate. (i have 1 small door ding, and the paint on the roof has some oxidization) not sure how much that effects it.

so say i get 10k in trade in, i'll only be taxed on 15,000. which at 8% is 1200. not too bad. so out the door i should be expecting to pay 26,200. correct?

There are usually registration fees, and also dealers will sometimes charge you a doc fee. When you negotiate on a car, always ask for the out the door price. Not just the price of the car. Some dealers are shady and have some pretty hefty fees they don't disclose until you are doing the paperwork.

Yeah but you just lost $3k on the trade in. It's all relative! From the sounds of it your new to the whole buying cars thing, I would suggest to bring along someone you trust with experience at dealers. Getting information from us all is a good start.

yes, this is my 2nd car purchase. i don't feel like i got the best deal i could have with my first one, want to make sure i go in knowing what to expect. tax is a big additional cost to consider.

with an msrp of 25,000 including the 750 destination fee.

10,000 trade in, 8% sales tax. what should i expect my out the door price to be in order to be getting a good deal?

It depends on your registration fees. In Minnesota it is pretty high. I want to say I paid close to $400.

Best way to do it is to call or email around before you go to the dealer and ask what the out the door price is for the car you are looking for, and ask what they charge for doc fees. I almost always negotiate via email or phone before I even set foot in a dealership.

A friend of mine payed 19k for an Aveo once :eyebulge:, and she thought she knew what she was doing, always bring someone that has done this before with you!

When I bought my first new car, I was 19-20, brought my mom with as she's a haggler of epic proportions, and she managed to get all the dealer fees waived, that on my first attempt I couldn't get them to budge. Learned a lot that day.

You cannot get a deal on the car because they should be selling it for MSRP.

The only room to get a deal on is your trade in value. If the dealer will give you $10k and the car is worth $13k on the market its a bad deal unless you don't mind losing 2 grand so you don't have to mess with selling it. But dealers right now are giving high value on trade ins. The used car market is great for them right now. What is your trade in?

Edit: The warranty and financing is often where the dealers make there money. They hate when someone walks in with cash and says no extending warranty :)
IMO don't get a warranty!!

Keep in mind that many dealers will try to get you on the trade (they probably make more money off used cars than new cars). I was getting a $1200 variance between Ford, Hyundai, and Mazda dealers on my trade recently. And whatever their first number is, you can almost always get more. My dealer came up $500 on my trade and matched what Mazda was going to give me.

Go to the edmunds site, new car buying section. There's a lot of good advice and information about buying a new car, what to expect, fees, etc. This is my 3rd new car, and I still learned a lot.

Shouldn't the tax be applied to the vehicle and accessories only? The fees should be added after the vehicle + tax, or am I mistaken? I see this little piece as another way for the dealer to squeeze a few extra bucks out.

Think about it. When you bring a car in for service you are taxed on the parts only, not the labor. A dealer DOC fee and any other misc fee should be considered labor.

the dealer fee is taxable with car price and accessories

You only live once so you should try to get what makes you happy, BUT if your worried about spending $2000 in tax I would say you can't afford it. Wait a few years or so and pick up a used one.

Everything is taxed. Fees, dest and delivery etc. Labor fees already include tax.

Oh I'm sure it is, but should it be, legally?

You even say that labor already is taxed, therefore the DOC fees should also be "pre-taxed" IMO, for the same reason.

Again, I have no doubt the experiences we've all had over the years in paying it the way you state, but do we really know if we could have done it my way? Has anyone tried?

I've never had this much trouble because I always offer a drive out price, very simple. However they calculated taxes/fees on my purchases, it came from inside the number I offered. For all I care they could have a $20000 DOC fee listed taxed or not.

I stopped by my local dealer today and he gave me this as a reference to what I'd be paying. Price is MSRP PLUS the $95 trunk mat. The 8.5% tax was after the price + doc fees. Out the door payment is $28723.05

It's legal. Shouldn't be probably but it is.

Wow, thanks for that chart! I never would have imagined that NC would have one of the lowest vehicles taxes in the country. It's not zero, but I can't really complain about 3%.

You DO realize that they don't keep the tax, right?

It'd be nice if we were like some European countries and had tax built into the prices of what we buy, but think of it this way: If Walmart were to input taxes into what they sell, the prices wouldn't look as attractive. Say you see something on the shelf for $1.99, which ends up being something like $2.14 after tax. Companies like to put nice round numbers on what they sell, as it encourages the consumer to buy them. They can't still charge $1.99 for the item after tax, because their profit margins are already very small (and why would they throw away a majority of their profit anyway?). They could round the price up to $2.25, but in that case you pay even more just for the convenience of having the tax added in! Then you add in the complication of different sales taxes (or smaller food taxes in some cases) among different states (and even within the state!) and people get confused and complain when an item appears to cost more in one store than it does in another one a couple miles away.

Of course I do. But you realize if it turns out to be true that they don't have to tax the fees, that they won't be paying that extra in taxes.

Example: go buy a gun through state-state transfer and pay the transfer fee. Some dealers charge tax on that transfer fee, while others do not. The guy that does simply pockets the tax because it doesn't need to be paid because it was never needed to be collected.

If they only owed say $100 to the state but collected $110, they aren't going to give the extra $10 away for nothing.

If they have it written down as being taxed and they aren't actually giving that money to the state then you could sue their pants off.

Lol, highly unlikely.

Who's going to hire a lawyer to sue to reclaim a couple hundred dollars anyway? "sue their pants off" suggests a big lawsuit, when in reality it wouldn't be anything higher than small claims court.

They would win the case by simply saying they made a mistake.
.
.
.
I spent a couple hours on Edmunds forums last night and there are lots of threads asking the same question I am. Nobody over the several years of answers provided one with any certainty...all were guesses and assumptions, just like the responses here.

What we need is a tax attorney or small business owner to reply here in regards to taxing non-material things.

They'd be in big trouble because they'd be committing fraud. They couldn't claim it was a mistake if they've been doing it to everybody who comes in.

you must be a Romney supporter

Taxes are what allows you to live your life the way you are living it. It's called wealth redistribution.

Be glad you're only paying 8%

Your best bet (and easiest) is to simply ask your dealer the out the door cost, as has been mentioned. I looked at those sites and often the information is incorrect. One of them said my state tax was 8% when in fact it was only 3%. Just call your dealer.