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How is new car sales tax calculated with Trade In in California?

azred

Active Member
Apr 12, 2016
1,900
2,198
Chandler, AZ
A good example of why it is tricky to compare tax burdens for various states. CA Tesla buyers get that nice fat $2500 but buyers from most states get a nice tax break on a trade difference.
 

sgalla04

Member
Mar 24, 2021
454
466
Philadelphia, Pennsylvania
Does it matter if you still owe on the car that is getting traded in?

My Tesla trade-in value is $21,700, but I owe $21,664 on its current loan. My local sales tax in Philadelphia is 8%. Do I save 8% on the $21,700 or 8% on the $36 difference? Obviously this is a big difference and will determine if I go with Carvana or not.

My final payment changed when I accepted Tesla's trade-in value. My SA said it's because I still owe on the trade. So if I pay off my current car's loan before delivery next week, then I'll save the additional $1,733? It's either that or get the $2,229 additional from Carvana. And my SA just told me I need the physical title for the car, so it's doubtful I'll be able to move money around fast enough to pay off plus get the physical title in time.

I was willing to go with Tesla's offer + sale tax savings if less than $500 for convenience. It was $496 less, but if this is true with still owing on my current loan, then that's a big hassle to get the sales tax savings. Which one is correct? I am able to schedule delivery for Monday next week.
 

peety3

Member
Jan 29, 2021
51
21
Duvall, WA
Does it matter if you still owe on the car that is getting traded in?

My Tesla trade-in value is $21,700, but I owe $21,664 on its current loan. My local sales tax in Philadelphia is 8%. Do I save 8% on the $21,700 or 8% on the $36 difference? Obviously this is a big difference and will determine if I go with Carvana or not.

My final payment changed when I accepted Tesla's trade-in value. My SA said it's because I still owe on the trade. So if I pay off my current car's loan before delivery next week, then I'll save the additional $1,733? It's either that or get the $2,229 additional from Carvana. And my SA just told me I need the physical title for the car, so it's doubtful I'll be able to move money around fast enough to pay off plus get the physical title in time.

I was willing to go with Tesla's offer + sale tax savings if less than $500 for convenience. It was $496 less, but if this is true with still owing on my current loan, then that's a big hassle to get the sales tax savings. Which one is correct? I am able to schedule delivery for Monday next week.
The DMV doesn't care what you owe. To them, it's 100% about the purchase PRICE (you paying Tesla) for the new car minus the purchase PRICE (Tesla paying you and/or your lender) for the trade-in. They don't care if the trade-in involves paying two parties or one. I'm sure there's a process by which they can pull the title from the lender; we went through something similar in December when I totaled my wife's MB GLE300d. The salvage auctioneers sent me paperwork to sign over the title to be pulled from the lender, and I suspect the notarized/signed copies of those forms are sufficient to allow the state to treat it as legit for transfer purposes.
 

sgalla04

Member
Mar 24, 2021
454
466
Philadelphia, Pennsylvania
The DMV doesn't care what you owe. To them, it's 100% about the purchase PRICE (you paying Tesla) for the new car minus the purchase PRICE (Tesla paying you and/or your lender) for the trade-in. They don't care if the trade-in involves paying two parties or one. I'm sure there's a process by which they can pull the title from the lender; we went through something similar in December when I totaled my wife's MB GLE300d. The salvage auctioneers sent me paperwork to sign over the title to be pulled from the lender, and I suspect the notarized/signed copies of those forms are sufficient to allow the state to treat it as legit for transfer purposes.
So are you saying Tesla is doing this incorrectly? My friend who owns a Cadillac dealership also confirmed this for the state of PA.

I even dug up an old purchase agreement for when I traded in a 2006 Civic that I owned outright. I was given $2,000 for the trade. There is a net trade-in allowance field. This makes me feel reconfirmed at least for PA that it is truly only on the positive equity of the car for saving on sales tax. And reiterating, I'm not dwelling on this, since I'm getting more with Carvana anyway. It would have just been nice to know in advance.


1623294488582.png
 

cwerdna

Active Member
Jul 11, 2012
3,550
2,437
SF Bay Area, CA
So are you saying Tesla is doing this incorrectly? My friend who owns a Cadillac dealership also confirmed this for the state of PA.

I even dug up an old purchase agreement for when I traded in a 2006 Civic that I owned outright. I was given $2,000 for the trade. There is a net trade-in allowance field. This makes me feel reconfirmed at least for PA that it is truly only on the positive equity of the car for saving on sales tax. And reiterating, I'm not dwelling on this, since I'm getting more with Carvana anyway. It would have just been nice to know in advance.


View attachment 671469
It depends on the state. See What New Car Fees Should You Pay? | Edmunds under Trade-in sales tax credit.

In CA, a trade-in or not has no bearing the sales paid when buying a new car. In PA, it does help. You'd only pay the difference. I'd never even heard of this before until I moved to WA state (was there for 9 years) since I grew up in CA.
 

cwerdna

Active Member
Jul 11, 2012
3,550
2,437
SF Bay Area, CA
CA Tesla buyers get that nice fat $2500 but buyers from most states get a nice tax break on a trade difference.
If you're talking about the CA CVRP (CVRP Eligible Vehicles) it has gone down to $2000 and there are numerous Eligibility Guidelines including limits.

I've never been eligible for CA CVRP:
- 1st Leaf: leased for 24 months so it was too short a lease. I knew that going in. Back then, 3 year leases were more expensive in the end per month even AFTER $2500 CVRP vs taking a 24-month lease and 0 CVRP.
- 2nd Leaf: was used. Bought to replace above car at lease end. Used EVs aren't eligible.
- 3rd EV (a new Bolt): Income limits were either added or lowered to the point where there's no way I can qualify. I earn WAY too much $ per year. Income Eligibility is the current cap.

You are also super lucky that registration on EVs is DIRT cheap in AZ. Your guy's 5 year tabs are less than a single year in CA on the same car. To renew the tabs on my '19 Bolt for ONE year (did this in early Jan 2021), cost me $421 + $8.84 service fee (2.1%) for using a credit card. Fortunately, that CC gives me 2% cash back...

And remember, I've never once received CVRP.
 
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