Automotive

Trade-in and Tax question

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  • Mar 7th, 2005 5:33 pm
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Sr. Member
Sep 20, 2002
509 posts
20 upvotes

Trade-in and Tax question

When buying a car and trading in the vehicle, are the following the same or not:

(a) pre-tax: purchase price of 20000 with trade-in price of 15000
(b) pre-tax: purchase price of 17000 with trade-in price of 12000

I know that tax is added to the purchase price, and my guess is that the trade-in price probably has no effect on the overall tax I'll be charged with. So I'm guessing the second deal is better?

Thanks.
"Until you find something worth dying for, you haven't begun to live..." - Rev. Martin Luther King, Jr.
4 replies
Banned
Jan 11, 2004
19816 posts
572 upvotes
vincevoltaire wrote:When buying a car and trading in the vehicle, are the following the same or not:

(a) pre-tax: purchase price of 20000 with trade-in price of 15000
(b) pre-tax: purchase price of 17000 with trade-in price of 12000

I know that tax is added to the purchase price, and my guess is that the trade-in price probably has no effect on the overall tax I'll be charged with. So I'm guessing the second deal is better?

Thanks.
NO, both are the same... net purchase price of 5000 and tax on 5000 for both
Deal Addict
Sep 7, 2002
1585 posts
3 upvotes
Newmarket
you've already paid taxes on the vehicle you are trading in (well you should have) so i'm pretty sure it is taken away before the tax is applied on the new purchase.
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Deal Addict
Aug 24, 2003
1306 posts
216 upvotes
The way it works is like this

Lets say the brand new car is 20k and the dealer gives you 5k for your car, you only pay tax on the difference, which would be 15k.

So it would be 15k X PSTandGST
Deal Expert
User avatar
Jun 14, 2003
23140 posts
202 upvotes
vincevoltaire wrote:When buying a car and trading in the vehicle, are the following the same or not:

(a) pre-tax: purchase price of 20000 with trade-in price of 15000
(b) pre-tax: purchase price of 17000 with trade-in price of 12000

I know that tax is added to the purchase price, and my guess is that the trade-in price probably has no effect on the overall tax I'll be charged with. So I'm guessing the second deal is better?

Thanks.
The first deal is better because you may be able to get a better car loan (if you need one). Also, for insurance purpose, if your car is written off and your insurance can cover the full purchase price in the first one or two years, you can get $20000 back instead of $17000.

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