Buying a vehicle can certainly be an exciting time. After all, you’re probably looking forward to experiencing the latest technology, performance, and features along with that new car smell. Especially if you’re trading in your existing vehicle, there is one important thing to remember when it comes to maximizing the savings on your new purchase.
Trading in your vehicle here in the State of New Jersey (along with many other states) allows you to offset the tax liability of your vehicle purchase. While you may be tempted to sell your vehicle to a car-buying service like Carvana, CarMax, Vroom, and others – this can prove to be a costly mistake. Our team at the Schumacher Auto Group has explained this concept in greater detail below to help you understand the advantages that come from trading in your car on your next vehicle purchase.
You’ve probably been tempted by offers to sell your vehicle to popular car-buying services like Carvana, CarMax, and Vroom. While they give you the option to sell your car outright via a streamlined process, it’s important to consider the fact that you’ll be unable to take advantage of the tax benefits that come from trading your current vehicle in on your next one.
As an example, let’s say that your next new vehicle costs $40,000 and your trade-in is worth $20,000. Maybe someone else offers you $21,000 to buy your vehicle outright. Sounds like an easy decision, right? Take the $21,000 cash offer instead of the $20,000 Trade Value? Turns out – taking the cash offer might actually cost you money!
Trading your vehicle in to the dealership means that you’ll only have to pay sales tax (6.625% New Jersey State Tax in this example) on the difference between the new vehicle sales price and your trade-in value (just $20,000). So you’ll pay only $1,325 in New Jersey State Sales tax.
Selling your vehicle outright to some 3rd party means that you’ll have to pay sales tax on the full $40,000 purchase price of your next vehicle (a total of $2,650 in New Jersey State Tax at 6.625%). So even though the 3rd party gave you an extra $1,000 for your trade, you’ll still end up losing $325 overall after you consider the tax implications.
Trading Your Vehicle In
VS
Selling Your Vehicle Outright
$40,000
New Vehicle Cost
$40,000
$20,000
Trade-In Value
$0
$20,000
Tax Liability
$40,000
$1,325
NJ Sales Tax Paid (6.625%)
$2,650
Save Time and Money – Trade Your Vehicle In Today
Now that we’ve covered the financial benefits of trading your vehicle in on your next one, it’s important to not overlook the convenience of doing so. Selling your vehicle to a car buying service means you’ll have to waste time and money driving across town, dealing with multiple transactions, and paying more for doing so. Trading your vehicle in means you’ll enjoy tax savings and the convenience of handling your next vehicle purchase at the same time. Our team at Schumacher is standing by to make your next car buying experience both simple and straightforward so you can spend more time enjoying your new ride!
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