If you're in the market for a new vehicle, purchasing your new car or truck before the end of 2019 is a win-win for buyers. In addition to the traditional year-end clearance prices you'll enjoy as dealerships clear out inventory before the start of a new year, you can benefit by taking advantage of the soon-to-disappear tax credit when you trade in your current vehicle.
If you're looking for a new vehicle but haven't made the decision to actually purchase one yet, consider what will happen if you wait until 2020.
Let’s say you’re buying a new vehicle for $35,000 – about the average cost in 2018 – and trading in a car valued at $20,000. Currently, you would only pay sales tax on the difference, or $15,000. The average sales tax on this transaction would be roughly $1,311.
However in 2020, trade-in credit above $10,000 will be taxed in addition to the difference between the new and used car prices. In this example, the $20,000 trade-in will not be taxed on the first $10,000 in value, but the remaining $10,000 gets taxed along with the $15,000 difference between the new and used car values. So sales taxes will be applied to $25,000 of the transaction, which will cost you $2,185.
So the same car deal will cost you an extra $874 in sales taxes if you wait until after January 1s to trade in your car for a new one.
Don't let the new tax law increase what you'll pay for a new vehicle. For more information about trading your vehicle in during 2019 and avoiding the upcoming new 2020 tax law, please contact:
Hawk Volkswagen in Joliet
#1 Volume VW Dealer in Illinois*
*Based on 2018 retail sales